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Blockbuster on the verge of defeat in battle against Netflix, technology

Once-dominant video rental chain Blockbuster is trying its hardest to
prove that it can compete in the 21st century. It is closing down
stores, and has been bulking up its on-demand offering.

But it looks like it may be too little, too late. Last Thursday, the New
York Stock Exchange announced that the company would be delisted from
the exchange after the company failed to win shareholder approval for a measure that would boost the company’s stock price above , the
exchange’s minimum. More often than not, a company’s delisting is signal of impending demise.

The only good news for Blockbuster last week was that its bondholders decided to give the video rental chain a six week extension on an interest payment. But the company has a whopping bn in debt and the odds of it surviving seem slim. While it has become somewhat cliché to claim that the internet has killed [insert industry name here], the truth of the matter is that technological disruption, led by companies like Netflix and Redbox, is responsible for many of Blockbuster’s woes.

Netflix, of course, used the internet to make renting videos as simple as clicking a button and checking your mail, and is now helping make internet-based on-demand viewing a mainstream phenomenon. And Redbox’s model, which sports self-service kiosks and /day rentals, has obvious advantages over the bricks-and-mortar model Blockbuster dominated before the rise of the internet.

Blockbuster, of course, wasn’t completely ignorant of the technological disruption that was taking place around it. In 2007, it bought online video service Movielink. And its on-demand offering takes advantage of set-top boxes, the Xbox 360 and even mobile devices. But execution has always been a problem. Blockbuster dropped Movielink’s technology in 2009, and it arguably took too long to develop its on-demand offering.

In the face of technological change, Blockbuster’s brand hasn’t been a particularly potent weapon. Had Blockbuster moved fast enough, and brought to market compelling new offerings before upstarts like Netflix and Redbox completely disrupted it, the company may have been able to leverage its brand to keep consumers from flocking elsewhere. But today, no matter how hard Blockbuster tries, it will have a hard time winning back consumers. Blockbuster’s brand simply represents the past.

As Blockbuster’s end nears, there’s a good lesson here for other companies facing technological change: your brand can only do so much. And when you don’t move fast enough to adapt, it can even become a liability.

Photo credit: sunshinecity via Flickr.

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