Blockbuster’s Bad Business Decision

Danny Arno

Professor McKeon

MG 321*02

February 17, 2015

Blockbuster’s Bad Business Decision

        When I think of a bad business decision there are a few that come to mind. Companies such as RIM (blackberry) and BP with the oil spill are instantly brought up when thinking about companies in the past who have made mistakes. However, the company that I decided to take a look at was Blockbuster. It is not about what Blockbuster did, but rather what they did not do. Blockbuster missed out on the opportunity of a lifetime back in the early 2000’s when Reed Hastings, CEO of Netflix flew out to Dallas to meet with Blockbuster executives. Hastings had hopes of selling Netflix to Blockbuster because they were loosing money, had only 300,000 subscribers and relied on the postal service to deliver their product. However Blockbuster, who had over 7,000 stores open at the time decided to pass on Hastings offer to form together to have Netflix become Blockbuster’s own streaming service. The offer entailed a 49% stake in the company and also to take on Blockbuster’s name but the executives ultimately decided to not purchase Netflix.

        It is true that the digital media was not as obvious as it is now and the thought that technology would be where it is today was not in Blockbuster’s mind.

About 5 years later, roles began to switch as Blockbuster’s downward spiral began just as Netflix’s began to grow. Netflix at this time had a steady growing membership with close to 5 million subscribers. Blockbuster tried to launch its own subscription service as well but by this time it was in fact to late.

        In relation to the decision-making theory, Blockbuster was presented with a choice that ultimately lead to the destruction of their company. It is interesting to see that the secret to Blockbusters initial success was due to their ability to use technology to make sure that every store was stocked up with new and popular movies. Blockbuster failed to adapt to the changing tastes of American consumers, something that came back to bite them. There are ways that Blockbuster could have avoided this from happening. Executives could have took notice of all possible alternatives, determine the consequences of implementing each alternative, used a well-organized set of preferences, more of a comparison to see the consequences and of course looking into the long term goal for the future rather than short term right now. As of late 2014, Netflix is valued at more than 20 billion and Blockbuster filed for bankruptcy in 2010 closed its last retail stores and copycat service of Netflix in 2013.