On Monday morning, June, 28 2007, John Antioco sat down at his desk and shuffled through his notes. Nearly ten years as the Chairman and CEO of Blockbuster Video, today Antioco was to deliver a company update to eager-eared lenders buzzing on a conference call. The largest movie rental chain on planet Earth, Blockbuster was plowing through another quarter, swatting down competition but also pivoting in a new and hazy landscape of customer experience. On this call, Antioco touted a leading 40% market share, despite their nearest competitor’s sliver doubling the last two years. This film-hawking foe, Netflix, was a pesky movie-by-mail subscription service that had just introduced a new streaming platform branded as the YouTube for movies. Blockbuster themselves had just recently launched a mail service to compete, and while Antioco asserted that digital delivery- the ability to watch a movie online- would provide customers the control and flexibility they ultimately wanted, the actual nuts and bolts of a Blockbuster digital service were still “TBD”. In other words, there was no plan for that yet.
You couldn’t really blame him at the time. Blockbuster in 2007 was still an industry titan, the retail catalyst that brought the wonder and excitement of the motion picture studios into the living rooms of consumers in 22 countries across the globe. At their peak just a few years before, Blockbuster had 9000 stores, and a stranglehold on market share. The video rental stores were staples in every community; as common as a McDonalds. On any evening in the 90s and early 2000s, a row of warm car bumpers lined Blockbuster storefronts across the country, all lit-up bright blue from the signage above. The glass front door would be swinging open all night long, almost as much as the cash register drawer. They were a truly giant, a world recognized brand. Their partnerships were strong and far-reaching. They had a NASCAR driver, a college football bowl game, and had just debuted a Superbowl commercial. But halfway through 2007, behind the sponsorships and bright blue bulbs, something was wrong with Blockbuster. John Antioco and his team did their best to twist and swivel the optics, and cheerlead with presentation slides and smiles, but the future was becoming evident. This giant was tired…and behind it, stood a young Netflix with a pebble and a slingshot.
Change is Too Fast to Chase: Stay Ahead
That conference call was on a Monday. John Antioco didn’t make it through the week. After ten years as CEO, he was unceremoniously replaced that Friday. His successor may be best remembered for his cavalier comments of Netflix, saying they weren’t even “on the radar.” However, it was Blockbuster themselves that would endure a difficult few years navigating that radar before finally taping out to the competition and filing for bankruptcy protection in 2010. Now, just think about that for a second; they were all done by 2010. Just for perspective, if John Antioco had leased a car the Monday afternoon following his conference call, he would be unemployed before the first payment was due, and his world-recognized empire would be broke and liquidated by the time the lease matured. Change happens fast, and a transformation of that magnitude must have felt like a knockout jab to the Blockbuster brass. That quick pain was felt partly because Blockbuster died while trying to chase Netflix (and Redbox for that matter). Even with the resources of the public investment, and a twelve-year head start, they were caught flat-footed by the change in consumer behavior. By the time Blockbuster became hip to the movie-by-mail model, Netflix had already jumped to the streaming subscription model. Game, set, match.
Soft Markets & Hard Decisions
Another red flag on that call, Antioco attributed a soft in-store rental market to mediocre studio content. In other words, it was Hollywood’s fault that Blockbuster sales were lagging. He insisted that a more-favorable release slate in the second half of the year would create momentum. Spoiler alert: that momentum never came. Has anyone ever told you that traffic was down because the product was stale, and that a new redesigned model would bring buyers through the foyer? Don’t accept this premise. You can’t run your business on the prospects of carrying Motor Trend’s Car of the Year, much more than a video rental business could run on the prediction of an Oscar-winning performance by Tom Hanks. A solid and customer-centric business model should thrive whether you are selling cash cars on a corner lot or collecting rooftops for your auto group. (Listen, I’m not referring to once in a generation happenstances like the Covid-19 outbreak for example; nobody can save you if your business isn’t allowed to open.) That said, global pandemics aside, if your business has a reoccurring “softness,” problem, you need to look at your people and/or your processes, because one of them (if not both) is failing you. It’s your job to create momentum, not to wait for the factory to create it for you. When a business model is disconnected, hard decisions and difficult conversations are going to occur-one way or another- you may as well be the initiator.
Obsess on the Customer Evolution
We are in a landscape of consumer control and flexibility today, and there are dozens of competitors raising their slingshots. That’s why it’s critical during these times to remember when plotting the future of our own empires to have a legitimate vision for the customer evolution and to create the best path forward. That may sound like a lot to unpack, but it’s a simple idea and it can’t be overthought: keep your eyes on tomorrow’s customer. Blockbuster and John Antioco were instead exhausting ways to service yesterday’s customer. They squandered millions of dollars on in-store campaigns and promotions that failed when they could have been investing in profitable channels outside the four walls of the store. At that time, you might have even heard his district managers imploring their franchisees to “just get them in the door!” (Sound familiar?) All the while, Netflix was so dialed-in to the customer evolution, that they actually poured the footings for the next steps. As dealers, the true time-tested experts of this industry, will we ignore this time of evolution with phony confidence of the past? Will we just chase Carvana into the next decade, stumbling behind like a tired giant; or will we have the obsession, the vision to pave the new customer experience ourselves?
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Joel Gordon
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