If you think Netflix was the cause of Blockbuster’s failure, you’ll change your mind after you hear Alan Payne explain the reasons for this company’s demise. Alan was a longtime owner of a chain of successful Blockbuster stores. He was also featured in the Netflix 2020 documentary, The Last Blockbuster. His new book is Built to Fail, and we learn four reasons for Blockbuster’s eventual bankruptcy which started with poor leadership at the CEO level.
- The study of business failure
- Blockbuster’s five CEOs each failed in their own way – not digging into the details was a common thread
- The biggest myths about Blockbuster’s failure
- The Blockbuster origin story has its beginnings with a Supreme Court ruling
- David Cook’s first video store and why investors did not beat his door down
- H-E-B, the first known retailer to enter the video business
- Hollywood Video, another formidable competitor
- Alan Payne’s entry point to Blockbuster
- Revenue Sharing – a cash flow killer or a business savior?
- The unforced error of ending late fees
- A high-growth company that never transitioned into an operating company
Quentin Tarantino on the Video Store
… a cultural thing that was lost. And nothing worthwhile has taken its place. To tell you the truth, I don’t know why it was lost.Introduction, Built to Fail by Alan Payne
Who Was Wayne Huizenga?
- Built three different Fortune 500 companies
- Bought Blockbuster for $18.5 million
- Went from 20 to 3,000 stores in six years
- The first stores generated $1 million in revenues and a third fell to the bottom line
- He bought hundreds of competitors during this industry rollup
- Never wanted to be a franchise-driven company
- Sold 9 years later for $8.4 billion
- According to Alan’s book, he was more interested in buying and growing the store count instead of managing them
- By Huizenga’s own admission, he was driven to build companies, not run them
The Producer’s Cut
My Kindle edition is heavily highlighted, and some of the terms and concepts below resonate. After you read the book, come back to these questions and give them careful consideration.
- Revenue Sharing – what it was and why it was used at Blockbuster. Had you been the CEO, would you have used revenue sharing with the studios? Why or why not?
- The Catalog – Alan and his stores invested heavily in the catalog. Had you been running a store, how would have determined which older releases to carry and why? Would this have been a worthwhile investment?
- Kiosks – Blockbuster never took kiosks seriously until it was too late. Had you been one of the earlier CEOs of Blockbuster when this innovation was introduced, what would you have done?
- The Business of Commoditization – based on what you’ve heard from Alan Payne, can the lessons learned in a highly-commoditized business be applied in other industries? Remember, some of these stores were generating $1 million in revenues with a 33% bottom line.
- Managed Dissatisfaction – this is one of my favorite terms in Alan’s book. What is it and why should we care about this term?
- Customer and Data Obsession – Alan reminds us that Netflix was obsessed with data, and they used that information to create a more personalization with its customer base. How is that happening in your company?
Books Mentioned On the Show
I ask every guest about their favorite books. Here are a few of the titles Alan mentioned:
- Undaunted Courage by Stephen Ambrose
- John Adams by David McCullough
- Any book by Jeff Shaara
- Focus by Al Ries
- Nuts!: Southwest Airlines’ Crazy Recipe for Business and Personal Success by Freiberg and Freiberg
Other Books on Business Failure
After I met Alan Payne via email, I mentioned a few other books to him about business failure. We can learn as much about business with respect to failure as their successes. Here are three books to add to your shelf if you like Alan’s book which I easily give 5 stars: