Lessons From The Blockbuster Bankruptcy

On Thursday, Blockbuster Inc. filed for bankruptcy.  The retail video rental chain, which employs about 25,000 people, is close to $1 billion in debt and is getting hammered by Netflix and other companies that offer different approaches to delivery of movies and entertainment options to consumers.

I haven’t been to a Blockbuster store in years, but I pass one on my commute to work every day, and there has been a noticeable decline in traffic at that store.  Consumers obviously prefer the mail order/on-line alternatives to driving to the nearest Blockbuster store, rummaging through the shelves in hopes of finding a worthwhile video to watch that night, and then paying late fees when they forget to return the movie in timely fashion.

The lesson of the Blockbuster bankruptcy is that the tastes and practices of American consumers are ever-changing and often influenced by new technology — which is why so many people are skeptical when the federal government tries to pick winners and losers, subsidizes particular industries or lines of business, or otherwise attempts to influence consumer choices or the direction of the American economy.  Blockbuster was once a mighty company, with busy stores in every shopping mall.  People who looked at the company in its heyday probably thought that, of course, Blockbuster would be profitable indefinitely.   When something better came along, however, Americans left the Blockbuster model behind without a second thought.

At least no one is suggesting that we should bail Blockbuster out.

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