CX Case Study

What really happened to Blockbuster Video?

Value Model: During the peak years, Blockbusters value model made good sense. Customers really had no idea where to buy video tapes, the cost of the tapes they could find was very high, and this restricted selection and choice. Or you could just drive to Blockbuster and find a wall of movies that you could simply rent for only $3 bucks!

For those of you too young to really remember Blockbuster video; once a upon a time families made a trip to Blockbuster to rent a movie. It was a lot like going to the library. You’d browse the store, pick up a new release for a couple bucks, and have a couple days to watch your movie. If you brought it back late, you got late fees. At its peak, Blockbuster had over 9,000 video-rental stores in the United States alone, employed about 84,000 people worldwide, and had 65 million registered customers. It was valued at $3 billion.

How they did it

Blockbuster capitalized on the fact that movies were not generally available for purchase

Blockbuster leveraged exclusive agreements with publishers in order to pass on cost savings to customers. Customers paid a monthly fee for video rental. In addition to benefiting from a lower initial price, Blockbuster also capitalized on the fact that movies were not generally available for purchase at affordable price points which at that time ranged between $70–$100 per title. Thus customers had a choice, either buy the film on tape at the much higher manufacturer’s suggested retail price, or rent at a much lower price.

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