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The Decline Of Blockbuster Entertainment Essay

782 words - 4 pages

The Decline of Blockbuster Entertainment
How could a company that was built into a multibillion dollar empire fail less than two decades later? Blockbuster Entertainment started with one store in Dallas in 1985 and rose up to become the dominant force in the movie rental industry. They were acquired by Viacom, at the pinnacle of their success, for $8.4 billion in 1994 and were in bankruptcy by 2010. A series of blunders by upper management, highlighted by a lack of strategic vision, led to Blockbuster’s rapid decline and ultimate failure.
In 2000 Blockbuster had the opportunity to purchase rival, Netflix but failed to envision Netflix’s potential. The founder of Netflix, Reed Hastings, met ...view middle of the document...

4 billion Viacom paid for Blockbuster in 1994 was reinvested into Viacom. Viacom stripped Blockbuster of cash to help boost their bid to purchase Paramount Pictures. Blockbuster was acquired by Viacom to be nothing more than an ATM, and it was the only reason they waited so long to dump Blockbuster. In turn Blockbuster was left buried in debt, with an antiquated infrastructure and no means to improve it.
In 2005 Blockbuster eliminated late fees due to it being their number one customer complaint. In an ironic twist, Reed Hastings had founded Netflix after incurring a $40 late fee for returning the movie Apollo 13 late to his local Blockbuster. Ending late fees would cost Blockbuster nearly $400 million in yearly profits. This now placed them in a position where they no longer had the cash flow to pay down their debt obligations, and with the reduction in profits they were also unable to reinvest in their company. With the end to late fees customers began to keep their rentals longer. This resulted in a new number one customer complaint of titles always being out of stock.
Red Box, founded in 2003, would be the finishing knockout punch to Blockbuster. Already reeling from customer losses to Netflix, Blockbuster management failed, once again, to realize the potential of a new delivery system, the kiosk....

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