Blockbuster Laughed at Netflix Partnership Proposal in 2000

December 11, 2010 -

An interesting article on C|Net points out Blockbuster's biggest blunder in the last decade: not collaborating with Netflix when it had its chance. In fact, the former leader in video rentals actually scoffed at the idea many years ago. Now, with the company in and out of bankruptcy, Blockbuster might want a do-over.

In 2000, Blockbuster CEO John Antioco was approached by Netflix CEO and co-founder Reed Hastings about putting together a partnership, according to Barry McCarthy's recollection of events detailed in an interview ten years ago with the Unofficial Stanford blog. C|Net found the interview while researching a story about the Netflix CFO's exit from the company.

From the article:

"I remembered getting on a plane, I think sometime in 2000, with Reed [Hastings] and [Netflix co-founder] Marc Randolph and flying down to Dallas, Texas and meeting with John Antioco," McCarthy said in the interview. "Reed had the chutzpah to propose to them that we run their brand online and that they run [our] brand in the stores and they just about laughed us out of their office. At least initially, they thought we were a very small niche business. Gradually over time, as we grew our market, his thinking evolved but initially they ignored us and that was much to our advantage."

Barry McCarthy is leaving his Netflix CFO post with $40 million. 

Source: Blue's News


Comments

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

Eh, I still maintain Blockbuster's biggest 'mistake' was taking on a billion and a half dollars of someone else's debt and then being stuck making payments that eat up over half their revenue.  If they were not paying that debt, they would currently be in the black with plenty of cash left over for infrastructure investment. 

I have grown really tired of this 'netflix killed blockbuster' meme. It makes a nice simple tagline that techies can go 'ah ha! common sense, no one I know still rents videos from stores!' while in reality a good chunk of the population still does, and Blockbuster's basic buisness should be sound if not for some dirty dealing.

Put enother way, if this deal had gone through, Blockbuster would probably still be failing and dragging netflix down with it.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

I take peeks inside sometimes to see what they're selling off, but the oen near me is gone.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

I still go to Blockbuster.  When I want to rent a game, I want it then, not a few days later.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

That is one of the things that keeps them brining in money.. if you look at their reporting, they have a monthly gross income of around 1.1 billion, while netflix only brings in about 130M...

Heh... given that that Blockbuster's monthly shortfall is ~50M, and Netflix's monthly profit is only 5M... yeah, Blockbuster would have taken Netflix down with them.

Sorry, only looked up those numbers when I wanted to comment how much cash Blockbuster was still making.  Anyway, my origial respons was to say that this is why Blockbuster is still making so much money, instant gratification.  While a SMALL percent of the population has both broadband and a device for streaming (with limited selection), nothing beats a brick and mortar rental shop when it comes to instant gratification ^_^

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

Netflix is great for streaming yes but you don't need broadband to enjoy their rental by mail service.  I don't know what sorts of monthly fee services blockbuster has but paying $9 a month and having access to unlimited streaming and 1 dvd at a time is more than I could need from netflix.  I think there are plenty of people out there who have access to either a playstation 3, xbox 360 or Wii that is connected to the internet through an ethernet cable and able to stream.  If you rent movies frequently enough, some of the 2 or 3 at a time services from Netflix look very nice.  I usually get through 4-6 dvds a month on my plan.  

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

'Plenty' yes, but sales figures put penetration anywhere from 30-62 million, and broadband penetration sits around 60%... so even best case scenario leaves a massive market for non-streaming services (even if streaming services were comparable in content to mail DVD or brick&mortar, which for the moment they are not).

It also depends on your usage pattern.  Blockbuster capitilizes on the impluse 'we are bored, let us go rent a movie' instead of the planned stream of movies others get.  Much of that simply depends on how the person's social life is structured and how predictable movie viewing is.  Netflix lacks a certain level of flexability there.  Netflix also depends on browsing through websites and building queues, which many people do not wish to do (keep in mind, not everyone is all that wired, just look at how crowded malls are right now when most tech-heads are just going to amazon and such).

Heh.  I think this whole topic shows why tech people have a hard time starting companies.... they are used to themselves and thier social groups and tend to forget that they are a (sizeable) minority, NOT the average consumer.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

In my view, the writing on the wall was there for Blockbuster in 2000. Blockbuster is the perfect example of a business that appears to have completely failed to even see the changes in the market, let alone respond to them. Personally, I'm surprised they've stayed above water so long.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

The world is ever changing. Those that can't see to change their business models will loose out.

Re: Blockbuster Laughed at Netflix Partnership Proposal in ...

The RIAA's time is rapidly coming.

 
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