Strategy
Blockbuster… it’s late… as always…
10/08/2007
0

Today Blockbuster acquired MovieLink (a company that makes video on demand service) and something came into my mind. In those days often and often is happening that big companies prefer to acquire other smaller companies than developing a new product/service, I consider this an advantage for those points:

  1. Better Development: The small companies that are acquired usually are born as IT Companies that hires engineers and developers to create a service, usually the guy in charge is a self-made-man and he had the initial idea and knows how to develop it, and the same guy has also the view of how the future will be or could be. Knows the technologies available and manage his own team how his spirit deserve. In this way the product is developed in a better and fastest way cause the owner has a clear way on how to proceed. If a company that comes from an another market (like video retailer as Blockbuster) starts to create a similar product probably will hire a management that comes from its own business world, a manager that for how much he is competent in his job can’t organize a company that manages a different service. The manager hopefully would be able to create the product wanted, but for his incompetence this product would cost more and will have more delays. So why not acquire something made by people that knows how the digital environment works, it is going to cost less and probably would have features that couldn’t be thought in the beginning.
  2. The cherry on the cream: cause as we all know this is a competitive world all the startups makes an invisible war on who would be able to create the better product adding as cited before widgets or new great and killer applications on the system, so at the big company remains only to buy the cherry company on a cream-elite group of similar companies.
  3. Just on time: cause the product is finished the acquiring company will know for sure that there will be no delays on the development, and that means that it would be able to start the new digital product/platform in a really small time.

So blockbuster simply followed the trend that is going on right now and that Google and Yahoo started almost one year ago. But the thing that didn’t took on valuation are:

  1. Always the last: Blockbuster is a worldwide company and is really well known, but the thing is that she is always the last to arrive. Years ago it was the king of the home video distribution system, then arrived Netflix with their innovative service, so Blockbuster copied and started a battle for the lowest price. Now that there are more competitors online (NetFlix one of those) Blockbuster woke up and understood that is better to move.
  2. Real vs Virtual World: Blockbuster is the king in the off-line world, mainly cause of its numerous stores available everywhere, but in the virtual world Blockbuster is no-one, cause their real world store can’t help in a virtual world.
  3. Competition: On internet there are lots of competitors at the moment and those have a rich catalog and exclusive rights for the distribution of movies, how can Blockbuster deal with it? Also iTunes has an incredible platform and also the Apple TV that takes your movies directly on your television (or Amazon Unbox for example).

Looking at all the points described till now is easy to think that Blockbuster is a giant… a really slow giant, that had all the possibility and capitals to create the first online on-demand video retailing company, but for reasons that nobody knows (maybe management, maybe general vision, maybe else…) they didn’t do it…

From this example there is a lesson that everyone has to learn, stay open to new views visions and frontiers and if you arrive late try to buy a company, in this way you will be able to gain the time that you could have spent for the development of the service/service and hopefully become one of the biggest competitor on your market-share.

About author

Edoardo Piccolotto

Dad, husband, MBA graduate, I work as a Web Marketer on an Ecommerce Company, where I implement strategic decisions by using data and lean-organization methodologies.

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