The early days of the home-video rental era were dominated by corner stores and mom-and-pop shops. But in 1985, the opening of the first Blockbuster Video, in Dallas, Texas, launched a chain that would revolutionize the industry. By 1990, Blockbuster had 1,200 stores, with a new one opening every day.
Blockbuster was able to promote movies in a way no local chain could. With a national distribution and advertising network, it was instrumental in getting movie-watchers to stay in instead of going out — a shift that is only more pronounced today. By bringing Hollywood home, it became a Hollywood icon itself.
Like most of its competitors, Blockbuster weathered the switch from videocassettes to DVDs. But recent years were tougher. It moved into video-game rentals and sales, mail-order subscriptions and online downloads, but always remained one step behind upstarts such as Redbox, Netflix and, in Canada, Zip.ca.
The former video giant announced recently it may close up to 960 of its 4,356 U.S. stores, on top of existing plans to downsize an additional 250 outlets. Many of the closures will be replaced by stand-alone kiosks, in an attempt to emulate Redbox’s success. But emulation has not been Blockbuster’s strong suit: its mail-order service reached a peak of three million U.S. subscribers in 2007, but has since dwindled to just 1.6 million — a far cry from the 10.6 million users registered with Netflix. Blockbuster’s revenue from traditional video rentals is dropping too, down nearly 18% in the U.S. in the second quarter of 2009.
The company that Viacom once bought for US$8.4 billion now has a market value of only US$225 million. Its stock currently sits at about US$1.38, after hitting a low of 22¢US in March. In February, U.S. News & World Report named Blockbuster one of its 15 Companies That Might Not Survive 2009. The company says it isn’t close to collapse, but for those who remember what Blockbuster once represented, it already has.