With HMV announcing they were entering administration earlier this month, many people were left wondering as to who was going to fall victim next to the high street. They didn’t have to wait long for the answer; with Blockbuster announcing on 16th January 2013, that they too, were going into administration.
Blockbuster’s core business, has 2 million active members, and will keep all 528 stores open while seeking a buyer. There are 60 jobs at risk in the Derbyshire area, with stores based at Ashbourne Road, Derby, Alvaston, Oakwood, Ilkeston, Ripley, Matlock, Alfreton, Long Eaton and Chesterfield continuing to trade.
So why has Blockbuster fallen into administration? To answer the question fully we need to look closer into its business model. The first UK Blockbuster opened its doors way back in 1989, with a small store in South London. The company grew in popularity and size; with its key ability to customise stores for the area they were in, focusing on demographic profiles to fulfil customer demand. The chain continued to do well, but started to struggle against online retailers in early 2000. To combat this, they launched an online DVD rental operation in 2002, and this proved successful, with the company claiming that www.blockbuster.co.uk sends out more discs per customer than any other online DVD rental service in the UK. Despite this, the company has closed over 100 outlets in the past few years, struggling to compete with the popularity of streaming movie websites.
In 2011, Blockbuster went bankrupt in the US, but was rescued by the American TV Provider ‘Dish Network’ in a £200m deal, and the UK business is also now owned by them, but run separately. Before the buyout, there were plans of a large expansion by Blockbuster, introducing the selling of electronics goods such as TVs and Laptops, but these plans were scrapped by Dish Network. For the past two years, many experts have expressed their fear over the long term future of the company, and this week those fears were turned into reality with the news of both the US and UK companies entering administration.
The reasons for Blockbuster’s recent struggle can mostly be pinpointed to the increased advancements in technology within the home entrainment sector. The popularity of home streaming can be linked back to the ease of usage for the customer; films can now be viewed at home, without the need of a customer having to leave their house to collect the DVD. Home streaming also needs no pre-planning, an instant decision to watch a film, can be met with a few clicks of a mouse. Many business experts also feel that the company failed to adapt quick enough to combat these changes in their field. Blockbuster could have implemented a plan to stream movies themselves, but they failed to spot just how popular this would become. They also struggled with online competition from sites such as Play.com and Amazon, where you can purchase a DVD for not much more than the cost of renting one from Blockbuster.
Sibbalds contacted Dr Steve Musson directly, a lecturer at the University of Reading and an expert in the economics of UK cities, to see what his thoughts were on the struggles of Blockbuster, and he had this to say: “Blockbuster’s success through the 1990s was based on the rapid growth of home entertainment technologies like VHS and later DVD. It is ironic that its failure to keep pace with new technologies like online streaming have contributed to its current problems. Blockbuster also suffered heavily from new internet-based competitors, like Netflix and Lovefilm, which offered convenience and choice to potential customers without the overheads of a network of over 500 physical stores.”
However, it is not all doom and gloom for the company; with experts fairly confident a buyer will be found soon for the company. The reason for this is due to Blockbuster’s vast back catalogue, with them storing films not available on streaming websites. This area of the business will need to be looked at in more detail, but by providing niche films to customers, they have a unique selling point which can be explored further.
The future remains cloudy for Blockbuster, but with potential avenues and prospect buyers being explored, many are hoping that a new buyer will be found sooner rather than later, a huge relief for the 60 workers in Derbyshire and the workforce, as a whole, nationwide.
Image by ell brown