Miscellaneous Musings – On Blockbuster and the Possible End of an Era

July 29, 2010

On Blockbuster and the Possible End of an Era

This week, I read the news of Blockbuster Video’s possibly imminent demise with a tinge of sadness. If it indeed comes to pass, I can’t help but feel that we will have lost something valuable forever.

Several years ago, The Wherehouse, my former employer, went bankrupt and, with the exception of a few stores scattered along the West Coast, simply disappeared from sight. By the time I returned to San Francisco, the building where I had at times run both the used CD section and the DVD section was being used to sell carpets and rugs. The Wherehouse had had numerous financial problems in the years that preceded its final declaration of bankruptcy, and the writing had been on the wall even during the time I was still working there. The company was too often run based on odd computer calculations that would make a small business owner scratch his head in amazement – sell one copy of a DVD, send them five more, regardless of how many were still sitting on the sales floor. I remember once getting a phone call from an excited young employee at the head office in Torrence informing me that she was presently meeting with representatives of Paramount Pictures regarding the release of Forrest Gump on DVD. The conversation went something like this.

“How many copies do you think you need?”
“At most twenty. I don’t think it will sell very well.”
“Really? I was going to send you ninety.”

Weeks later, I received sixty, a compromise of sorts, I suppose.

The first week’s sales: under ten
Copies On Hand: over fifty
Number received in the following shipment: seven

Eventually most of these would be sent back in a product pull.

What happened with the Forrest Gump DVD was unfortunately repeated time and again with many other sales products. In addition, products that could have sold (Image-Entertainment’s release of the Charlie Chaplin’s films, Transformers: the Movie, foreign films, etc.) weren’t ordered, and products that were going to sell well were occasionally ordered in such staggeringly high numbers that the company’s profits on some titles were severely undercut. Fifty first-week sales of Mariah Carey’s new CDs doesn’t sound quite so impressive when you have ninety more on a shelf in the back room. It means you sold less than half of what some executive was convinced you needed, and then there was that little matter of the replenishment that was on its way. Towards the end of my tenure at Wherehouse, someone high up got it into his head that the company should be the go-to place for both Japanese animation and movies with gay/lesbian themes, neither of which sold particularly well at my location. That fact didn’t stop the company from sending the store fifteen copies of a title that I had been unable to sell one of in months. Like Forrest Gump, most of these would eventually be sent back.

Perhaps The Wherehouse’s biggest mistake was in not realizing that the market was changing. As sites liked the now defunct www.reel.com began proliferating across the Web, those in charge of The Wherehouse continued to see their primary competition as being whichever chain store just happened to have the closest physically proximity to us, which in our case was Tower Records on Market and Noe. The powers that be simply did not understand – at least not fast enough – that the Internet was now its chief competitor, and at that time, Internet sites were operating on a business model that put building a customer base ahead of profits. Running in the red was encouraged. As time went by, more and more consumers turned off by products at “regular price” flocked to the Internet. As for The Wherehouse, they kept their prices high, even going so far as to end their long-running discount of 25% off on all DVDs.

Within a few years, the company was gone, and unfortunately, Tower Record was not far behind. In 2006, I returned to San Francisco for the first time in a year and a half just in time to witness its going-out-of-business sale. On the other side of the Stonestown Mall sat a sporting goods store. It too was decorated with a large colorful sign declaring that all things had to go. It was a sad time indeed, and unfortunately times have not gotten much better, especially for my home state - hard-hit, poorly managed California.

I read that Blockbuster will most likely survive in the form of low-cost, rental boxes similar to Redbox. A few smaller stores may survive as well. However, Blockbuster’s days of being a powerhouse appear to be over. The news has elicited surprisingly little sympathy. Most people commenting on news stories about Blockbuster seem to be ecstatic over its fate, as if what has happened to it were a form of poetic justice for some evil deed that Blockbuster had committed in the past. In such comments, most people relate rather unpleasant experiences, many of which have to do with encounters with rude or uncaring cashiers.

Others however reserve their anger for a company policy that they see as excessively cruel – late fees. The late fee policy that ruffled so many feathers was in fact a remnant of the VHS years. It’s often forgotten just how difficult it was for the average video store to profit off of a single VHS tape, especially if the film was a new release. Rental pricing meant that a VHS tape cost anywhere from $50 - $90. Retailers that ordered tapes in higher quantities may have been able to get a better deal, but that deal carried with it significantly greater risk – it was much harder for a store to break even on a video tape or to make a profit off of it. At $3 a rental, a tape has to be rented at least seventeen times to start making money for the store. When DVDs exploded in popularity, it became much easier for stores to make a profit. However, most if not all were likely still paying off their supply of VHS tapes, and once people saw how clear DVD was, many people simply stopped renting tapes altogether, a trend that certainly didn’t help the bottom lines of video stores nationwide.

The switch from VHS to DVD left video stores with an additional question to ponder: Should they replace their selection of VHS catalogue films with DVDs? Some did, some didn’t. Those that didn’t were labeled as being behind in the times; most of those that did saw their impressive collection of classic and foreign films sit virtually untouched as customers flocked to the recently-arrived DVD rack looking for the latest special effects extravaganza, the kind of film they had been told in numerous commercials was perfectly suited for their new home theater system. It was a no-win situation. And that was before "Generation Free" and Netflix.

"Generation Free" is my term for the mass that emerged in the late 1990’s and continues to flourish today. It began with bank fees. Yearly charges, fees for new checks, fees for using another bank’s ATM – if a bank charged it, it was simply evil. Sensing the increasing hostility towards banks, they made the decision to give the people want they wanted, and subsequently “free banking” became an overnight buzzword. However, banks had to find another source of income, which they did – much to the detriment of the country. Later, Internet access came to be thought of as a right instead of a privilege. Commercials enticed customers with tantalizing promises of free Internet service, and customers jumped at the offer. Few of them bothered to ask themselves exactly how these companies would actually make money. The Internet brought cheaper prices than traditional retail stores could afford; online customer-loyalty then proved to be a bit of an oxymoron as consumers seemed intent on buying everything at bargain-basement prices, revealing the entire Internet business model of “bring ‘em in at a low price and then raise prices later” to be the pipe dream that it was, and then came Netflix with its vast stock and smile-inducing promises of no late fees or return dates. The casualties since have been staggering. How many jobs have been lost? How many lives have been permanently altered?

I don’t mean to imply that my experiences at Blockbuster have always been pleasant, for they haven’t. I’ve met my fair share of employees in their teens and early twenties who didn’t know much about foreign films or American films before 1977 and who at times seemed more interested in chatting with their co-workers than working the floor. Truth be told, I was a little like them when I first entered the work force. People change; they grow up; their interests expand. However, if Blockbuster indeed folds as is prognosticated, we will have lost something. Places like Blockbuster, Tower, and The Wherehouse enabled young employees to attend a school dance, to buy that first used car, and to save up or pay for college. They were places where like-minded people went to work, where most employees knew something about the products that was being sold or rented and were for the most part happy to be part of it, where bonds between customers and employees could be formed based on similar tastes regardless of generation, gender or ethnicity. Some of my fondest memories of my nearly five years at The Wherehouse involve the people employed there and the many customers I got to know over the years. These experiences were truly invaluable, and now there are fewer places for people to have ones like them. And there’s something very sad about that.