Blockbuster vs. Redbox Business Model

Blockbuster vs. Redbox Business Model

Coinstar, the parent company of Redbox announced record earnings this week.  Net income tripled from the previous period.  Clearly, Redbox’s $1 rental model with 20,000 locations is superior to Blockbuster’s retail store model.

In their press release, Redbox is bullish on the growth opportunities for the $1 rental model.  Redbox feels it can double the current number of outlets. So how did Redbox succeed in a market where the market leader was floundering?  Quite simply, Redbox is a better futurist.  All great business models capitalize on powerful trends.  Redbox caught a break with the sluggish economy driving demand for cheaper rentals.  However, their true genius was eliminating the inconvenience of running into the video store. 

Redbox locations are typically available 24 hours a day, so there are no worries about getting to the store by 10pm when it closes.  Redbox does not disclose their average rental fee.  However, you can bet it is not $1.  If you forget to return the video, you say, “Shoot, it’s only $1 to keep it another day.” 

Blockbuster was the first to capitalize on the video rental trend in the VHS days.  Blockbuster’s business model was focused on capitalizing on those trends.  It was a nice twenty year ride, but it’s over.  Unless Blockbuster can dramatically alter the business model and find a new and powerful trend to capitalize upon, they will be the next A & P.

As business owners, we make the same mistakes as Blockbuster.  We focus on today’s issues.  We focus on today’s business model.  We need to focus on innovating our business model to capitalize on upcoming trends.  Here is the rub.  Once you spot an upcoming trend, so does everyone else.  You don’t have any competitive advantage on a trend everyone sees.  The savvy CEOs realize that they have to guess at trends.  It’s a lot like catching a wave.  If you aren’t there ahead of time, you can’t catch it.  There is a bit of luck involved.  You have to be smart enough to get lucky. 

Don’t let your business model get stale.  Look into your crystal ball and see the future.  Retool your business model to best capitalize on your predictions.


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