Built to Fail: The Inside Story of Blockbuster’s Inevitable Bust

By Alan Payne

Reviewed by Chris Wendel

Alan Payne has an axe to grind. During the heyday of the video rental era, Payne operated perhaps the most successful Blockbuster Video franchise chain in the U.S. Unlike Blockbuster’s corporate owned stores, Payne had the autonomy to make many of his own business decisions, countering strategies made by Blockbuster corporation’s inept leadership.

Many of us remember when Blockbuster Video was the preeminent force in video rentals in the United States. The company was founded by Wayne Huizenga, a freewheeling entrepreneur who liked to take a successful industry sector, buy up competitors, and quickly expand. Blockbuster’s management knew how to grow but Payne claims that this is where their innovation ended. The company wouldn’t listen to its existing customers or franchisees to understand their needs and expectations. Information on customer movie preferences was seldom gathered or analyzed. As smaller competitors worked their analytics, those stores usually outperformed the Blockbuster store located close by.

During this era from 1985 to 2010, Blockbuster went through several CEO changes and was sold to Viacom. Each new leader dismissed successful innovations of Payne’s Alaska and Texas Blockbuster franchise locations. Payne used a number of approaches to question Blockbuster policies, offering up profitable innovations of his own. Each time he was rebuffed and dismissed by corporate higher ups.

The ill-fated Blockbuster regime reveals a lack of awareness and arrogance within its corporate hierarchy. With its quick expansion and established brand, Blockbuster had its time in the sun nationally as the preeminent purveyor of videos. What it was not equipped for were changes in the marketplace that required nimble shifts and reacting quickly to emerging competitors.

“Built to Fail” clarifies the details of Blockbuster’s reluctance to purchase Netflix in 2000, explaining how Blockbuster was already in a negative cash flow position and unable to make a deal happen. Payne also explains Blockbuster’s hesitancy to move from bulky VHS tapes to DVDs, its slow response to Netflix and Redbox, and other major missteps.

“Built to Fail” offers a different ending than business success books. Payne makes it clear that Blockbuster never developed a system for analyzing customer trends, video usage, and the impacts of its price changes. It’s unsettling to hear Payne explain that his own Blockbuster franchises developed systems that successfully adapted to the same changing market conditions. As Blockbuster flailed, Payne’s stores remained profitable and maintained an inventory of movie titles that customers sought. His ongoing attempts to share his strategies with the Blockbuster brass ranged from subtle suggestions at corporate meetings, to overt emails to Blockbusters higherups that received little response.

In its opening chapter, “Built to Fail” reveals the company’s disappointing ending, reducing any drama for readers that may be unaware of Blockbuster’s plight. Although most of us know how the Blockbuster story turns out, the book’s details serve as post-mortem of a mismanaged company. One can’t help but consider how Blockbuster might be around today, if it weren’t for its egotistical behavior and ill-informed choices.

During this time of COVID pandemic resurgence and recovery, more unpredictable shifts in market conditions are likely. Providing superior customer service and responding to customer needs will become a bigger test as many businesses struggle with cash flow and staffing. With these day-to-day challenges, “Built to Fail” might be best received by business owners needing to revisit why tracking customer needs and being strategic with pricing and inventory are essential competitive advantages.

Overall, “Built to Fail” clarifies the misunderstood role of Netflix in Blockbuster’s demise. Payne hammers readers consistently with ways Blockbuster’s leadership ignored its customers and franchisees. CEOs came and went but their insular arrogance prevented them from learning from information they had right in front of them.  The book serves as therapy for author Payne after his years of frustration, a fitting autopsy for Blockbuster, and a cautionary tale for companies that are in danger of growing too large, too fast.

Chris Wendel works for Northern Initiatives, a Community Development Financial institution (CDFI) based in Marquette, Mich. Northern Initiatives provides money and know-how to businesses throughout Michigan. Wendel lives and works in Traverse City and can be reached at: cwendel@northerninitiatives.org

 

Comments

comments