Busting the Blockbuster Brand

Tuesday April 05, 2005

One of America's most recognizable brands is pulling the wool over our eyes in one of the most abrupt rebranding efforts in recent history.

To start off 2005, Blockbuster made some big announcements. First and most audibly, it was doing away with late fees. Really?! Also, keep that DVD you rented, and they will do you the favor of charging your credit card without any trouble. These two announcements among five or six other changes over at Blockbuster have seemingly fallen from the movie-rental mountain top like an avalanche. You suppose they read my comment card? These are relatively swift ($90 million in two months) moves to not only remain competitive with Netflix, the emerging market killer in the DVD/Video/Game entertainment rental space, but to kill them off.

Now, I am both a Blockbuster and a Netflix customer and have been since…well, a long time. I have given Blockbuster well over $1000 in late fees in the last several years. (Yes, it's true. My wife did the math to illustrate a much different point.) So when we talk about Blockbuster, I am going to think late fees — every time.

The small issue here is, I believe, Blockbuster is trying to shed the late fee part of their brand and make it seem like they are radically changing their business model because they care about their customer. Really, it’s because Netflix is eating Blockbuster's lunch. And fast. Estimates out there in the ether claim Blockbuster Online will have 6.5 million rent-by-mail subscribers by 2008. Netflix, on the other hand, claimed a more conservative 5 million subs by the end of 2006. And while we all decide we'd rather use the Internet and mail to feed our entertainment habit, Blockbuster will decide what it needs to do with its more than 8,000 brick stores. (For the morbidly curious, this will be a real fun problem to watch. So keep your eyes peeled for a forthcoming announcement that Blockbuster has signed a deal with someone that can really use their retail infrastructure. My vote is Krispy Kreme but it will probably be something with George Foreman's name on it.)

The big issue here is that the Blockbuster brand machine wasn't kept oiled, and one frustrated Blockbuster customer invented a smarter way and accelerated the evolution of its business model. You know that Blockbuster wasn’t ready to forfeit nearly 30% of its annual revenue to keep its customers happy. Blockbuster did it to keep its customers, period. This is a story of the one tiny little cog that upset the whole machine, sending it reeling to stay alive. It’s an awesome story that will take many more turns before it is all over.

Now, I don’t know anyone stupid enough to say that Blockbuster will fail. They're far too big and their brand is burnished into the insides of our eyelids. They’re too smart and have too many dollars earmarked to resuscitate the part of their brand that Netflix has taken.

This brings me to my final point. A critical part of any brand is how the customer feels about it on the inside. Also, how it operates and how it survives hardship and competitive innovation. What if Blockbuster had a PR suggestion box? I would’ve written that Blockbuster should come right out and say:

"Hey, Netflix is eating our lunch, and because we are bigger, stronger and mighty resilient, we too are going to play this game, but a little harder. So no more late fees. Here are 5 new exciting options that you’ll love, and we are matching our new competitor's low fees, ease of use and growing selection. And as always, thank you for your continued patronage. Blockbuster appreciates it and looks forward to growing with you and your family."

Instead, they went with: “No more late fees.”