Internet killed the rental star

Once a giant of content distribution, Blockbuster's ride into the sunset has hit a major milestone with current own DISH Network Corp. (DISH) announcing the decision to close all 300 remaining video rental brick and mortar stores across the nation.  Also closing will be the by-mail DVD rental business, with the service ending in mid-December.

Together these moves will result in about 2,800 layoffs.  Blockbuster will continue to live on as a branded streaming content offerings from DISH -- including Blockbuster on Demand and Blockbuster@Home.

DISH President Joseph P. Clayton elaborates:

Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.

The dream is over -- sort of -- but Blockbuster's streaming services will live on.

Founded in 1985, Blockbuster was the biggest video rental chain in 1997, when it reached 4,000 stores across the country and around the world. At the time it employed 60,000 employees.  Viacom, Inc. (VIA), which acquired Blockbuster in 1994, took it public in 1999 under the BBI ticker, retaining partial ownership.

Blockbuster peaked in 2004, roughly two decades after its first store opened, with 9,000 total stores globally and about 60,000 employees.  But ultimately, the root of Blockbuster's demise may have at least anecdotally lie in its controversial late fees policy.  In 1998 new company "Netflix" was born.

Blockbuster Video
One of the final 300 Blockbuster Video stores [Image Source: AP]

Founder and CEO Reed Hastings recalls in an interview:

I had a big late fee for 'Apollo 13.' It was six weeks late and I owed the video store $40. I had misplaced the cassette. It was all my fault. I didn’t want to tell my wife about it. And I said to myself, 'I’m going to compromise the integrity of my marriage over a late fee?' Later, on my way to the gym, I realized they had a much better business model. You could pay $30 or $40 a month and work out as little or as much as you wanted.

It turned out he wasn't the only one.  While it took a while to catch on, Netflix, Inc. (NFLX) (which went public in 2002), and later Redbox Automated Retail, LLC would slowly demolish Blockbuster's reign first by tapping in to public vehemence over Blockbuster's late fees, and later by capitalizing on Blockbluster's sluggishness in moving into the digital content delivery space.  Oh, and Netflix's use of patent litigation helped to temporarily stall when Blockbuster did get serious about digital.  Blockbuster eventually did win the rights to launch digital services and cut its late fees, but that wasn't enough to save it -- by 2010 it was bankrupt.

Blockbuster helped Blu-Ray win by backing it in 2007. [Image Source: Akihabara News]

Arguably Blockbuster's last major contribution in the tech-space was its decision to back Blu-ray in 2007, a move that many felt at the time decided the high-definition war between Blu-ray and HD-DVD.  (Blockbuster also "almost" bought fallen consumer electronics retail giant Circuit City -- imagine that duo!)

In 2011 DISH bought BlockBuster at auction for $234M USD in cash.  By then only the 1,700 most profitable or desirably located of the 9,000 stores were still open.  In the years since, DISH has used Blockbuster's brand to push its digital content delivery efforts, but has slowly trimmed the Mail-DVD and retail presence as it lost customers. And here we are today.

For a slightly more detailed history see Quartz's "A Brief Illustrated History of Blockbuster..." (1985-present) and Reel of Time's "Blockbuster Facts" (1985-1998).

Sources: DISH, Quartz, Reel of Time

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