Everybody says Netflix killed Blockbuster. That's the clean version with a punchline.
Blockbuster got to 9,094 stores partly on the back of about $800 million a year in late fees, 16 percent of their revenue. The most hated thing about that company was holding up almost a fifth of the business. They dropped late fees in 2005 and posted a $57 million loss that same quarter. Then they built Total Access, DVDs by mail that you could carry into a store and swap for something off the shelf that day. My wife and I had it right at the end and it was better than anything Netflix was doing. Within weeks it was pulling more new subscribers than them. Every in-store swap cost about two bucks, and instead of solving that, the company got into a fight over the CEO's bonus. Antioco was out by 2007, Icahn brought in a guy who used to run 7-Eleven, and he killed it to protect margins.
Hollywood Video is a different story with the same ending. Movie Gallery won a bidding war for it and the debt killed them, bankrupt twice in three years. Dish bought what was left for $320 million, promised 1,500 stores would stay open, and closed all of it by 2013. Neither chain lost to streaming, they lost to leverage. And we never escaped the fees anyway. US households now average around $69 a month on streaming with 68 percent of subscribers on an ad tier. We used to pay two bucks once and be furious about a dollar a day. The other half of the episode is Friday nights, two movies and a game, picking a PS2 title off the cover art, that carpet and popcorn smell nobody can describe. Also, seriously, who wants to open a store with me.
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