Are You The Next Blockbuster Video?">no comments
The answer of course is yes. If it hasn’t happened to your industry already, someone somewhere is dreaming up, or building, a tool, product or business model that will make at least part of what you do obsolete.
The once mighty Blockbuster Video is a classic, and tragic example of this. The arrival of VHS movies was a very disruptive moment for the movie industry. It changed how movies were marketed and how money was made and distributed in cinema. The movie industry made a big fuss, and did everything it could to prevent movies from going toVHS or, failing that, wring every penny out of the VHS distributors. (The exception here is the adult movie industry, which has always been an early adopter and has managed to use every new medium to make boat loads of money).
In fact, the wide-spread adoption of VHS players did not really have a dramatic impact on movie attendance. Unlike TV.
(Graph taken from http://org.elon.edu/ipe/pautz2.pdf)
Movie rental shops popped up all over. In keeping with other retail trends in North America, small neighbourhood movie rental shops were soon overtaken by big box stores that could offer better prices and better selection. There remained (and still does) a place for small specialty stores that can offer niche content – especially if they choose their locations well.
The digital revolution seems to have caught Blockbuster completely unawares. Obviously the spreading of broadband has made downloading or streaming video easier than ever, and new services like Netflix and Hulu are capitalizing on consumer’s desire to watch what they want, when they want. I was always surprised that Blockbuster didn’t get into the streaming game itself. Offline, the arrival of automated movie rental vending machines and kiosks also took a massive bite out of Blockbuster’s clientele – as did video on demand offerings by cable and satellite TV subscribers.
Here’s the thing, Blockbuster stopped being able to compete on almost every front.
- Price: They weren’t the cheapest anymore. Sure, renting from them used to be a lot cheaper than going to the theater, but recently prices for a new movie rental were up around $7. Putting the piracy aside, the price for a rental at the automated kiosk near me was $1.99 and video on demand is usually about $5. Netflix costs $8/month for unlimited streaming.
- Convenience: All of the streaming and on-demand services are hands-down the most convenient, since you never have to leave your house, and you get what you want right away. Netflix’s video by mail service also lets you stay at home. even though you have to plan a bit. The DVD kiosk I use lets me check their available movies online and reserve the one I want, so I know in advance if I can get the movie I’m looking for.
- Service: The online, on-demand and automated services essentially take service out of the equation. Blockbuster – at least the ones I’ve been to – had terrible service. The kids that worked there were not particularly knowledgeable about movies, nor did they really seem to care about helping me find what I want or make suggestions. The small, niche stores are almost always run and staffed by cinephiles and fanatics who are able to provide loads of information and recommendations.
Blockbuster obviously didn’t pay enough attention to the fundamental shifts in the media industry (although they had only to look to the music business….) and missed the boat entirely – resulting in filing for bankruptcy protection in May 2011.
This kind of disruption is coming to your industry.
The way to avoid making the same mistakes as Blockbuster is to pay attention.
- Read some important tech blogs like TechCrunch, GigaOM and Lifehacker. These sites cover new developments in technology and new services that allow consumers to get information or products in new and creative ways.
- Watch your sales numbers. Are you growing? Shrinking? Flatline?
- Talk to your clients. Find out if they are using new tools or services that compete or completement what you do.
You can be iTunes. If not you’ll be Blockbuster.
In the music industry, Apple created a middle ground between the ripoff of traditional CDs and ripping off artists. Apple succeeded with iTunes by being cheaper than music in stores (especially since you can buy one song at a time) and having a bigger catalog than any store could ever have. At the same time, it’s much easier and faster, to find music on iTunes than to hunt around on BitTorrent sites (and you don’t have to worry about the quality of the file or about getting a crazy virus).
The key to surviving and thriving now and in the future is to have a clear understand of the value that you provide your clients. If you compete on price alone – be careful because new tools and global communications mean that someone in India or Bangladesh might be able to offer the same service of one tenth the cost.
I’ll give a personal example of a store that is competing with a giant – and keeps my business. My two older kids decided that they wanted to play ice hockey this year. I know that WalMart and Canadian Tire sell loads of hockey equipement very cheaply. However, at the store there is rarely anyone to help you, and if there is, they often don’t know the first thing about fitting kids for hockey equipment. On the other hand, there is a Play It Again Sports store nearby. They sell new and used sporting gear, with a heavy emphasis on hockey. The staff there are sports nuts. They know everything about the gear they sell. I showed up with a 4 year old and a five and a half year old, and was immediately approached by two sales people who offered to help. They fitted my kids for new equipment, and explained to me what to look for when fitting them in the future. They made sure that the skates we already had fit my kids properly.
Now Play It Again knows that they can’t compete on price with WalMart and Canadian Tire. The kid’s starter packages cost nearly TWICE AS MUCH as at the big stores. Sure, it’s better gear – but not two times better. Instead of chasing the big guys to the bottom, they rely on great products and exceptional service to real, tangible value for their clients.
How about you? Are you ready for the disruption?