Blockbuster is dead, while Netflix continues to realize Blockbuster’s vision that would have prevented its demise: the transformation from powerful movie retail company to powerful movie retail company that complements its extensive library with original content.

On the morning of Nov. 6, Dish Network announced that it will close the remaining 300 Blockbuster locations in early 2014. In the afternoon, Netflix and Disney announced a deal to produce four 13-episode series featuring Marvel Comics superheroes.

In 1993, four years before Netflix even existed, Blockbuster tried to become a media company by purchasing production titans Spelling Television and Republic Pictures. But one year later, Viacom purchased Blockbuster for $8.4 billion and gained control of Spelling and Republic.

Blockbuster could have realized this vision where Netflix has realized it: on the Internet. They could have accomplished this by emerging from Viacom’s controlling shadow.

In 1999, Blockbuster broke away from Viacom by going public. But in 2000, Blockbuster passed on a golden opportunity to transition to the Internet when Netflix offered itself for a pocket change sum of $50 million.

Blockbuster didn’t buy Netflix because it was a complacent monopoly.

Like other entertainment retail monopolies from the pre-Internet era, Blockbuster underestimated the Internet because it had squashed all previous competitors.

In the 1980s, companies like Blockbuster and Barnes & Noble became “category killers,” companies that marginalize smaller competitors by offering a wider variety of products at cheaper prices.

Blockbuster dominated the home video market, much like Barnes & Noble’s dominated the book market. The markets seemed so impenetrable that it led to complacency and denial among these companies regarding innovative trends like the Internet.

Between 1992-2004, instead of investing in burgeoning technologies like streaming video and online rentals, Blockbuster added more than 7,800 brick and mortar locations. As late as 2002, it was still calling the Internet a “niche market.”

With Netflix, Blockbuster’s lack of competition prevented it from seeing an obvious reality: Entertainment retail was transitioning to the Internet because it offered capabilities that brick and mortar outlets couldn’t match.

Like Blockbuster, Netflix offers a more extensive library than any other video retailer. It also groups titles by categories that are easy to identify and navigate.

Unlike Blockbuster, Netflix saves consumers a trip to the video store. It also uses an Internet algorithm to categorize titles by consumer preferences.

In preventing Blockbuster from seeing the Internet as more than a “niche market,” Blockbuster’s lack of competition created a terminal domino effect.

Without competitors, Blockbuster didn’t think it needed to embrace the Internet or Netflix. Since Blockbuster didn’t buy Netflix, it never took another shot at becoming the revolutionary retail-media hybrid company that Netflix has become.

Just as Blockbuster failed because it had no competitors, Netflix has succeeded because it has so many. On the Internet, Netflix is competing with retailers like iTunes and content producers like HBO. These content producers also double as retailers by distributing their own titles on streaming sites like HBOGo.

Since media companies don’t have the extensive libraries offered by retailers, the first retailer to double as an original content producer would gain a distinct advantage in a crowded entertainment marketplace. That’s exactly what Blockbuster once tried to do. It’s exactly what Netflix has done.

The Blockbuster story is now a cautionary tale. By sucking the competition out of a marketplace, monopolies suck the innovative life out of it too. This is why they fail to see the future even when they thought of it first.

Jarrad Saffren is a senior political science and newspaper and online journalism major. His column appears weekly. He can be reached at jdsaffre@syr.edu.

Published on November 13, 2013 at 1:42 am