Let’s rewind back to the early 2000s where movie rental stores reigned supreme and the best way to spend a Friday night as a kid was heading to your local Blockbuster. From action flicks to comedy and everything in between, Blockbuster had it all, and the process of picking out a physical movie to take home felt almost sacred. But seemingly overnight Blockbuster was ripped from our hands. What happened to Blockbuster? Yeah, sure they went bankrupt, but how did a multi-billion dollar company vanish so quickly?

The Blockbuster Boom

At its peak, Blockbuster owned over 9,000 stores in the United States, had 65 million registered customers and was valued at $3 billion dollars! Believe It or Not!, in one year, Blockbuster raked in over $800 million dollars worth of late fees alone! So how did a company with such booming success all but disappear in a little over a decade?

Blockbuster was started by David Cook, Cook saw the potential in the video-rental business and after opening the first Blockbuster in 1985, he saw quick success and opened three more stores in the next year! Blockbuster quickly cornered the video-rental market and separated themselves from other stores through their creative marketing and innovative barcode system.

Most video stores at the time could only keep track of a few hundred video titles per store, blockbuster, however, could keep track of 10,000 VHSes per store! Their signature barcode system not only allowed them more tracking analysis but also provided them with more potential to collect late fees which meant more money that could be invested into expanding.

Eventually Cook ended up leaving the company and one of their three major investors, Wayne Huizenga took over. With Huizenga in charge, an aggressive expansion campaign was mounted that involved both buying out competition and opening new Blockbuster stores at an unbelievable pace. At the peak, the chain was opening stores at a rate of one per day!

Behind The Blockbuster Bust

As Blockbuster continued to explode, executives worried about rising cable companies potentially threatening their business model. Blockbuster even went as far as considering purchasing one but ultimately never came around. Believe It or Not!, Blockbuster was expanding at such a rate during this period they even considered opening up an amusement park in Florida although the idea, like the cable buyout, would ultimately be scrapped (this one probably for good reason though).

In 1994 Blockbuster was sold to Viacom for a whopping $8 billion dollars! At this point you’re probably even more confused at how this corporate behemoth was able to disappear off of the face of the earth after establishing itself so deep within our culture. Well, in just 2 years under Viacom ownership, Blockbuster’s value was cut in half, the first of many major mistakes.

The Hollywood offices of media and entertainment giant Viacom

Meanwhile, Netflix had just opened its digital doors and at this early stage was only delivering DVDs. Blockbuster would make another major mistake and pass on acquiring Netflix for $50 million dollars. Even though Netflix was considered a threat,Blockbuster felt positive they would come out dominant in the end.

To say Blockbuster missed the on-demand digital wave would not be totally accurate as they partnered with ENRON for a digital on-demand streaming service. The partnership ultimately failed though as Blockbuster didn’t show much interest in putting significant time into the partnership and ENRON faced internal struggles.

The Video Store Vanishing Act

As the up-and-comers of the industry began to abandon late fees and focus heavily on delivery-by-mail service, Blockbuster was slow on the jump, continuing to focus on their physical stores and waiting nearly five years to start its own online delivery service.

As Netflix was making record profits and expanding into a revolutionary streaming platform Blockbuster mainly continued to focus on revamping their stores and in 2009 posted a loss of over $500 million dollars. At this stage, the floodgates opened, partnerships began to flee, they were delisted from the New York Stock Exchange and Blockbuster was experiencing a fall from grace unlike anything ever seen before.

As fast as Netflix, Hulu and Amazon Prime rose with their on demand streaming, Blockbuster crashed. Maybe the most painful note is that if Blockbuster had embraced the changing industry rather than doubling down, they likely would have been a giant. As part of the $50 million dollar Blockbuster-Netflix buyout offer, Netflix would have run the Blockbuster brand online. Meaning the Blockbuster brand would have forged ahead into streaming with all of their institutional connections and support alongside Netflix’s digital buildout.

Closed Blockbuster

Ultimately, the failure of Blockbuster came down to the company’s disinterest in moving with the changing industry in any substantial way. Blockbuster had all the power at their fingertips to be at the forefront of the streaming wave. But through doubling down on their strategies and trying everything but what consumers desired, they managed to run a corporate giant into the ground in just a few years.

So there you have it – from a multi-billion dollar company, to a refusal to adapt to a changing industry, Blockbuster managed to wipe itself from the face of the Earth in an unbelievably short period of time! I’m sure there are some of you out there that may not even remember Blockbuster, which to be completely honest, makes me a little sad. Let me know in the comments below if you were a Blockbuster user and if any part of you misses the nostalgia of video rental stores. Until next time, I’m Jordan Neese, and this is Ripley’s Rewind.


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