A couple of weeks after the news that Blockbuster Canada’s remaining stores are set to close, the media story is moving on to the inevitable loss of jobs and the imminent availability of large amounts of commercial retail and office space.
It seems that each Blockbuster store employs an average of 10 people, meaning about 2,500 people could be out of work in addition to the 1,400 people who lost their jobs during the first round of store closures earlier this summer.
So what happened to this once dominant global player? According to the Receiver last week “As a result of the significant changes in Blockbuster Canada Co.’s competitive landscape, the company’s ‘bricks and mortar’ business model has experienced significant challenges over the last few years, largely due to the proliferation of various alternatives available to media consumers in Canada.”
By way of background, in May this year Blockbuster Canada was placed into receivership by an Ontario court as a result of a combined US$70 million claim made by a number of movie distributors, including the Hollywood studios that provide its DVDs.
Previously the Canadian operations had acted as a guarantor for Blockbuster’s U.S. business, which filed for Chapter 11 bankruptcy protection in September 2010, while it attempted to restructure its debt. This seemingly last-gasp action was aimed at reducing the company’s debt from circa $1bn to around $100 million, with the hope that it would enable the company to compete with rivals; something that it had not been able to do in recent years. Blockbuster U.S. was later sold to American satellite TV provider Dish Network Corp, who declined to buy the Canadian operation but left it to pay the bills. Dish Network also pushed to prevent Blockbuster Canada from using the highly recognized brand name going forward.
It’s all a bit of a mess… but the reality is that Blockbuster had been struggling to stay relevant in a time of increasing digital movie downloads facilitated by the dramatic increase in internet accessibility together with an associated increase in data transfer speeds opened new channels to market.
It’s clear that the Internet and accelerated digital streaming are here to stay and, with ever faster download speeds, the user experience is set to improve even further. At the same time there has been a fundamental shift in consumer preferences and expectations.
Rivals to Blockbuster, such as Netflix, quickly took advantage of these changes and stormed ahead as they harnessed the opportunities presented. Blockbuster, on the other hand, struggled to service its debts and the resultant lack of liquidity led them to become increasingly inwardly focused as they fought to stay afloat. As a result, Blockbuster was forced into a turnaround position, reworking its strategy and attempting to differentiate itself from rivals as the only company to provide products across multiple delivery channels.
Our recent blog ‘Navigating Choppy Waters’ spoke about the increasing challenge of staying competitive in increasingly uncertain and rapidly changing economic conditions and detailed the ‘Top 5’ steps every company must take. The Blockbuster example further demonstrates that in order to compete over the long term, companies must focus externally and on the surrounding business realities and not just internally.
