Ten Years Later, Blockbuster Still Lacks A Digital Media Strategy (BBI)

Blockbuster Logo Almost ten years ago to the day, on August 24th, 1999, I sat down for dinner at the Mayflower Park Hotel in Seattle with senior executives from Blockbuster about a new video on demand movie service that they claimed, “would forever change the movie industry”. Back at the time, I was working for Globix, which had just built out a CDN and we were in discussions with Blockbuster about using our network to deliver their movies.

Fast forward one year later to July of 2000 when Blockbuster and Enron announced they were teaming up to deliver a Blockbuster entertainment service, initially featuring movies on-demand, via the Enron Intelligent Network. Globix never did get Blockbuster’s delivery business but as we all later found out in 2002, there never really was any business between Blockbuster and Enron to begin with.

At the time, similar movie services were also being worked on between U.S. West and Intertainer, a company funded by Sony and NBC and if you remember that era, you’ll recall that all the talk in the space was about how video on demand was this “killer-app” that telcos would use to destroy the VHS rental business.

While Blockbuster (BBI) was ahead of their time in 1999 and was thinking about a digital media strategy way before consumers wanted the service and the Internet was even able to support it, that foresight on their part never materialized into any real online video strategy over the next ten years. Today, Blockbuster is getting it’s head handed to it from Netflix and others who have developed, executed and rolled out online video services with much success, in a very short period of time.

Without a doubt, Blockbuster should have been in the position Netflix is in today as they were the first movers in the market. Yet ten years later, the company still can’t seem to get their act together when it comes to digital media. We’ve seen Blockbuster do wacky things like create in-store kiosks for downloads and their executives have never had a clear strategy for how they plan to take their video business into the digital era. While some might suggest that Blockbuster did have a strategy when they acquired Movielink in August of 2007, the company bought an outdated platform that has yet to be improved upon. The fact that two years after the Movielink acquisition Blockbuster still can’t support Mac users with their video on demand offering shows they are still relying on Movielink’s outdated technology for their digital media strategy.

Blockbuster is not thought of as a company that has any strategy for digital media and every year, seems to come up with some sort of new idea, like kiosks, only to them change their mind a year later. I’ve never met, talk to or read an interview with any executive from Blockbuster that makes any clear case as to why anyone should think of Blockbuster as a digital media company. Sure, their executives do a lot of interviews and talk a big game, but it’s all marketing fluff. They’ve never even presented their so called digital media strategy at any industry conference or event, I can’t find any white paper on it and no where on their website do they even outline what digital media means to their business.

Last March I was reading Don Reisinger’s article on CNET.com where he interviewed Kevin Lewis, Blockbuster’s new SVP of digital entertainment and Kevin’s answers to Don’s questions only goes to reinforce Blockbuster’s lack of strategy. Kevin is quoted as saying, “We are the only entertainment retailer with the ability to serve you a movie where you want, when you want it, how you want,” Lewis said. “Whether it’s at one of our stores, through virtual kiosks, or via downloads on a box like the TiVo, we can provide you with the most robust service.” How on earth can Blockbuster think anyone would take them seriously when their service doesn’t even support Mac users?

While I realize that Blockbuster wants to keep highlighting the fact they have local stores and as a result can service the customer over more channels than someone like Netflix, this is about a digital strategy. So talking about brick and mortar stores as an argument as to why their digital strategy is compelling simply makes no sense.

Or how about the fact that to date, Blockbuster’s service is not available on any gaming console, which is the number one selling device in the home for the playback of digital movies, outside of the PC. Blockbuster makes a big deal about their relationship with TiVo yet to date, TiVo only has 1.6M stand alone DVRs in the market and Microsoft and Sony combined have sold well over 20M consoles in North America. I love my TiVo, but for Blockbuster to act like having a deal with TiVo is such a big deal, they need to think again.

I realize that Blockbuster has made other deals like the one announced this week with Samsung, but that won’t even kick off till later in the year. And even with adding Vizio TVs to the mix, how many of those devices will be in the market in the next few years? While Blockbuster has also rolled out their own device for videos on demand, the MediaPoint set-top box doesn’t even come close to the functionality that Roku or others have. Not to mention, you can’t even find the set-top-box listed on Blockbuster’s home page. You would think that part of their digital media strategy would be to promote their own hardware that allows for digital downloads, but they don’t.

In Don’s article, he asks Kevin about Blockbuster’s competitors, that being Amazon and Netflix and I think the way Blockbuster responds to those questions really shows just how confused Blockbuster really is. When asked about Amazon Kevin said, “When the consumer sees Amazon’s logo on the side of the box, they are wondering, ‘am I going to be sold a toaster or a book?” Again, Blockbuster is being asked about their digital strategy as compared to a competitor and instead of addressing the question, replies with an answer about Amazon selling something from the website that is mailed to your house. That’s not a digital service and makes no sense to try and compare Blockbuster to it.

What are we seriously suppose to think when Blockbuster says, “Right now, we are the leader in the rental video business in the U.S. To the extent that the industry moves more digital, we plan to stay the leader. We know consumers are requiring more from us and we have no wish to lose our leadership.

Leadership? Based on what? You might be the leader in the movie rental business for DVDs, but that has absolutely nothing to do with digital. If you are the industry leader for DVD rentals, then why hasn’t that leadership translated over to the company for digital? No one, not a single person who doesn’t work for Blockbuster would think of them as a “leader” when it comes to digital. And when your SVP of digital entertainment says, “To the extent that the industry moves more digital, we plan to stay the leader,” really leads me to believe Blockbuster thinks we’re stupid. The industry is moving more to digital, to make it sound like anything else and to imply that Blockbuster leads in that category is simply false.

Why can’t someone from Blockbuster come right out and say they are working on a strategy, know they are late to the game and will present that strategy to the market as soon as they have their ducks in a row? That would be an acceptable answer, would be respected by the media and wouldn’t make Blockbuster look like they are drinking their own Kool-Aid. I challenge anyone to try and figure out what Blockbuster’s digital strategy is when the company makes no efforts to present it to the market. Where’s the communication from the company?

Sadly, I don’t think Blockbuster will ever be a leader in the digital media arena. While I don’t think it’s too late in the market, they simply don’t have the mentality or the foresight that they showed ten years ago. And while the online video movie industry is still in its infancy, if and when Blockbuster gets their act together, I think the opportunity will have already passed them by.

Note to Blockbuster: While this post may sound one sided, I called your corporate communications number three times over the span of a week, spoke to a live person, gave them all my details and was told someone would call me back. I also sent in a media request via your website. I never heard from anyone. If you want to respond to this post, I’ll gladly accept a response and will post it on my blog.

While we’re on the subject of your website, please fix your pages so they work for Mac users in Safari. As of the writing of this post, many pages like this one: http://www.blockbuster.com/corporate/news loads a blank page in Safari, but works fine in Firefox.

  • http://www.global-mix.com Dom Robinson

    Let em have it Dan.
    I think BT exhibit a similar ‘lost’ meandering with thier own ‘assumed monopoly’ of Telco infrastructure here in the UK. They seem eternally confused when it comes to Video Strategy. BT Vision? Ha ha ha. Perhaps a BT deal with Blockbuster?
    Then again: Blind leading the blind…
    lets ‘out’ a few more…
    Dom

  • Blockbuster=Losers

    Corporate culture – stuck in the 80’s – even after they’ve brought in new people
    Arrogance level, even today – High
    Ability to seize and impliment new ideas/concepts – Low
    Consumer loyalty – whatever

  • another blogger retard

    Great, another blogging retard with too much netflix stock. If I worked for BBi I wouldn’t return your calls either. You represent everything that is wrong with blogging idiots. All one sided self righteous opinion. Hold that netflix stock until it is shorted into the ground, please! Meanwhile, Blockbuster will stream content over every conceivable distribution channel, and keep kiosks and stores for the majority of poeple who are clueless about tech. Oh, great argument about game consoles, how about mentioning that Blockbuster is the only one who rents and sells GAMES! Blogging retards.

  • http://www.BusinessOfVideo.com Dan Rayburn

    Lets get the facts straight. I don’t own stock in any public company, including Netflix, so if your best argument to my post is I must be a shareholder in Netflix, well that just weak and wrong.
    Read this: http://blog.streamingmedia.com/the_business_of_online_vi/2007/08/i-am-not-a-fina.html
    And why would I mention anything about Blockbuster renting games? What does that have to do with their digital strategy? Absolutely nothing. You want to argue your point, great, do it. But you didn’t provide any arguments to any of the points I raised in my post.

  • Kevin

    LOL I just had to laugh at the guy calling Dan a blogging idiot.
    This guy sounds like one of the idiots on the yahoo stock message boards. Like most of those kids posting from their mothers basement if he doesn’t know who you are he obviously knows nothing about his stock in Blockbuster.

  • http://www.BusinessOfVideo.com Dan Rayburn

    I don’t mind being called an idiot, been called worse. I just wish folks would debate a subject with some insight and turn it into a real conversation, instead of just calling people names and implying someone must have a vested interest in the company in some financial way.

  • BRP

    Dan,
    Your statement that there was never any business between Blockbuster and Enron is incorrect. I can say this as I was involved in that new business.
    The Forbes article that you cite talks only about the crooked way that Enron accounted for this business.
    VOD was tested by the joint venture on a very limited scale, before the deal fell apart for other reasons, one of which was that the cost, technology, and market demand situation at that time would not support a profitable venture. I suspect that Enron starting to come apart was another…
    In fairness to Blockbuster, they did make a serious attempt to pioneer VOD. In fact, this aborted attempt may have made them reluctant to act again later, as they should have.

  • http://www.BusinessOfVideo.com Dan Rayburn

    @BRP – Yes, the VOD system was tested, in a trial, but that’s it. It then fell apart with both sides blaming each other for why it did not work out. No business or actual revenue was generated from it. So I don’t see how I am incorrect in saying “there never really was any business between Blockbuster and Enron to begin with.” No revenue = no business.

  • KDB

    Dan- I was on the Blockbuster web page and was able to find the Blockbuster Ondemand advertisement you mentioned “Not available” on the web site.
    http://www.blockbuster.com/download/ondemand
    Just a little FYI.

  • http://www.BusinessOfVideo.com Dan Rayburn

    @ KDB – No where did I say that the info about Blockbuster set-top-box was “not available” on the website, what I said was “you can’t even find the set-top-box listed on Blockbuster’s home page.”
    In order to get to the page you mention, it takes you three clicks to get there. You have to go to the home page, then click on “download”, then click on “blockbuster on demand”.

  • Ken Lay

    BRP – The Blockbuster/Enron deal was doomed because Enron ran around asking companies like Microsoft for $50M. We laughed them right out of the room and never heard from them again.
    Bottomline though is that Blockbuster didn’t just pick one loser parter/program/initiative – almost all of the efforts have been giant LOSERS. Think about it, they really don’t have a single success to hang their hat on in the last 10 years. This is a company that is done, finished, over, kaput. Someone just needs to put a pillow over their face and finish it off.

  • William O

    I’m not a writer, but this is a bad article. It sound like you wrote the article just to say how bad BB is. Sounds like you are mad because they didn’t answer your calls. Grow up.
    I’m really sorry I wasted my time reading your article. Definitely I will no read more articles from Dan Rayburn

  • http://www.BusinessOfVideo.com Dan Rayburn

    @ William – For the record, the morning the article published, Blockbuster called me and asked if they could talk to me next week, so the article did get their attention.
    You don’t have to agree with the article or anything I said in it, or read anything from me ever again, but you also gave absolutely no rebuttal to the points I raised in it.

  • Vincent T

    I think one of the founding hypothesis of your post is fundamentally wrong: you are talking about winning the battle of the “digital media”. Most consumers don’t care how they get access to their movies (from the store, from the mail, from their set-top box, …).
    Consumers care about movies (choice, quality). And here BBI has serious leverage and relationships with the studios.
    Consumers care about getting easy access to movies, getting help & recommendations (what Kevin calls “a brand to help navigating”). And there isn’t just one single solution for all consumers.
    Blockbuster’s strategy should be to multiply the contact points with consumers and deliver the best experience. And that’s exactly what all these deals with device makers mean.
    You may now want to write about execution. Because execution is the real challenge here. Not strategy.

  • Former smartest guy in the room

    Dan,
    What BRP conveniently forgets is that both BlockBuster and Enron were blowing smoke up each others butts, neither had the goods to pull off the deal. As I remember it Blockbuster failed to deliver the cooperation of the studios, so there was no content to transport. Enron failed to complete the engineering of the EIN, so there was no network bandwidth or intelligence capable of delivering movies on demand anyway. I believe the VOD tests used pre-loaded servers in apartment buildings, not network delivery.
    Enron, with power plants and pipelines — tangible value, was jealous of the IPO money and huge market caps of the dot-commies, who had no assets save for rooms full of interns surfing the web for video clips of other interns similarly wasting time and money. All the criminal self-dealing enabled the crooked E to temporarily emulate the OPM cash burn.
    HDTVBG

  • http://www.informedsauce.com ozone

    “another blogger retard” is insulting. I first came across Dan in 1999, through Globix, and he knows what he is talking about. I don’t view Dan’s blog as the usual forum trash, but carefully constructed and informed opinion.

  • Nomo Blockbuster

    The whole Blockbuster experience, whether it be in-store or online, is simply annoying now. BB deserves to go the way of the dinosaur.