VHS tape CD and Video Player

Icons via The Noun Project. CD icon by Edward Boatman, video player icon by Felipe Santana.

Businesses fail all the time. I’ve had a few myself and watched many others. Just about every entrepreneur I know has left one behind.

The hardest ones fail slowly, leaving us with some kind of hope that if we’d just tried this or that things would have been different. Ideally, we close up shop with some new lessons learned, only slightly banged up and ready to start again.

When large companies fail, and we certainly have seen some doozies in the past few years, we sit like armchair quarterbacks and make our calls on just what did them in.

Of course, if we’d been in charge, we would have seen that whole digital photography thing taking over, right? At times like those, I am thankful to have had my failures quietly and not in the headlines of every newspaper and blog.

The opinions seem to be especially loud when it’s a brand we grew up with, was especially successful, or was something that was part of our common experiences. The bigger they are, the harder they fall, right?

Blockbuster’s big bet

Kramer and Stratten's latest book, Unselling.

Kramer and Stratten’s latest book, Unselling.

Growing up, Friday nights meant wandering the aisles of Blockbuster to pick out a movie—quietly judging other people’s choices and hoping you’d remembered your membership card. The kid working behind the counter had seen every movie. The board in the back let you know when The Crow would finally be out on video.

Finding a Blockbuster case in the back of your locker at the end of the year and realizing Monty Python and the Holy Grail was 9 weeks late . . . the horror.

So, what happened? We are all still watching movies. That hasn’t changed. We still spend time Friday nights deciding which ones to watch. Although we all love our headphones, we still enjoy sitting around sharing a movie with our kids and friends. We still exchange currency for movies. Not everything has changed.

We look back now and kind of forget how Blockbuster was once the bad guy, doing in independent community video stores whose staffs really knew about movies and also didn’t care if you weren’t of age to rent them. Blockbuster wasn’t a small town place; it was a big deal to have one close by.

The selection at the time was amazing. You could rent video games and consoles there. Tons of movies and snacks were always in stock! All in one place. Blockbuster was convenient and gave us everything we wanted and expected when renting a movie.

Blockbuster didn’t change; we did. And that’s exactly the problem.

What changed wasn’t movies and our want for them. What changed was the format and the expectation of delivery, and Blockbuster didn’t keep up.

We still want movies. We just don’t need the discs anymore, and we expect to be able to sit at home and choose them. We want to choose them from our phones, both when we’re home and when we’re not.

If we want the discs—I have about 300 of them myself – then we order them online and have them delivered to our door the next day. We expect to seamlessly watch a movie on a number of devices now, not just the one TV connected to the one machine.

The danger of mythmaking

Kitchen Sink icon

Netflix founder Reed Hastings told analysts, “In the last six months, Blockbuster has thrown everything but the kitchen sink at us.” Image via The Noun Project.

Blockbuster closed it doors, after many going-out-of-business sales, because it failed to keep up with a change in format and expectation, not because of competitors.

Now, that’s not to say that it didn’t inspire competition. It’s known that Reed Hastings, who founded Netflix, started the company—or at least came up with the idea of it—angry about late fees after returning a movie 6 weeks late. All I did after finding my late movie was . . . I coulda been a zillionaire!

Netflix didn’t kill Blockbuster; it just went to where Blockbuster should have gone.

Netflix anticipated a change in the way people would be watching media and caught the trend. Blockbuster was already failing before Netflix was any kind of real competition.

“But,” as Paula Bernstein wrote, “it looks better to lose a war, than to lose from sheer incompetence.” Sometimes in business, we also just make the wrong choices.

In 2000, Blockbuster turned down the option to buy Netflix and instead went into a 20-year deal with a subsidiary of Enron, which filed for bankruptcy the next year.

Once Blockbuster saw that Netflix was gaining ground, it entered into the online movie rental market with everything it had left.

As the article shows in its awesome infographic, in 2004, Reed Hastings told analysts, “In the last six months, Blockbuster has thrown everything but the kitchen sink at us.” The next day, Hastings received a package in the mail from Blockbuster: a kitchen sink.

Fast shipping and creativity—something Blockbuster may have used better on their rental service . . . but anyway.

Lessons for content brands

open box icon black and white

“Companies that sold the wrapping die; those that sell the content live. It’s as simple as that.” Image by Blake Ferguson via The Noun Project.

Now that Netflix even controls some of the production of content, you can virtually walk in and choose what you want.

The content producer, without having advertisements as their profit drive, changed everything. Rather than selling the wrapping, they sell the content.

In other industries we see this, too, where books were wrapped in paper and publishers in the paper selling business. Now we no longer need the wrapping. The book is the content—in any format.

In music, the content was wrapped in plastic and made money by moving this plastic around and selling it. Now we buy the song or songs. Companies that sold the wrapping die; those that sell the content live. It’s as simple as that.

Everyone who watched Blockbuster slowly go out of business had an opinion of what it did wrong—and the truth is, as always, there isn’t just one thing.

Had Netflix read the trend wrong, we may never have heard of it. Had Blockbuster signed a different deal, we might be paying late fees right now for all the paused episodes of Mad Men we’re trying to get through.

Excerpted with permission of the publisher, Wiley, from UnSelling: The New Customer Experience Hardcover by Scott Stratten and Alison Kramer. Copyright (c) 2014 by Scott Stratten. All rights reserved. This book is available at all bookstores and online booksellers.

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