I have worked for corporations for over 30 years. Even when they annoy or disappoint me, I usually see the logic of their actions. But in the case of Blockbuster, there is no logic to respect. Looking past the shelves full of movies that no one wanted to rent -- which was no accident, by the way -- I will mention two aspects of how Blockbuster ran their business.
- Late fees were the only source of profit for individual Blockbuster stores. Do you remember driving to Blockbuster to avoid the 11 pm cutoff for returns? Do you remember disputes about when a tape was returned? Most consumers spent more money at Blockbuster than they had intended. Netflix proved that a successful rental business could be created without depending on late fees.
- Blockbuster corporate turned a profit only because of accounting magic applied to the management of inventories and the opening of new stores. An analyst at Bear Stearns wrote a widely publicized critique of Blockbuster's accounting in 1989. When customer uptake of (again) Netflix and Redbox ended the expansion of Blockbuster, the accounting magic quit working. Founded in 1985, the company peaked at 9000 stores in 2004; by 2010, they were bankrupt.
