How their belief in bricks-and-mortar brought Blockbuster crashing down
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Just 15 years ago, Blockbuster was the undisputed leader of the movie rental business. With 25,500 employees, 8,000 stores and 6,000 DVD vending machines, it generated annual cash flow of $500 million and was valued at $8 billion.
Customers flocked to their stores for movies and snacks, paying a hefty price for late returns.
The rise of Netflix
Over the years, competitors came and went. When, in the late 1990s, a fledgling start-up called Netflix launched a DVD-by-post service, Blockbuster wasn’t worried. The company’s belief in its business model was unwavering. So much so that when, in 2000, Netflix executives flew down to Texas with a partnership agreement, they were laughed out of the room.
The Netflix proposal was that, for $50 million, it would join forces with Blockbuster and help it launch its own online and DVD-by-mail service, whilst Blockbuster would promote Netflix in its stores. But Blockbuster saw Netflix as a niche player, failing to predict the explosion in the popularity of the subscription model, and later, online streaming services.
Blockbuster's failed agreements
A decade later, Blockbuster was bankrupt. Netflix, meanwhile, now has over 139 million paying subscribers in over 190 countries, and is worth a staggering $150 billion, making Blockbuster’s failed agreements one of the biggest mistakes in business history.
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