Rory Sutherland talks about Blockbuster missing the chance to buy Netflix for only $50M.
In the early 2000s, Blockbuster, the dominant video rental chain, had the opportunity to buy Netflix but passed on the deal. At the time, Netflix was still a young company, struggling to gain traction with its DVD-by-mail service. In 2000, Netflix’s founders, Reed Hastings and Marc Randolph, approached Blockbuster with an offer to sell their company for $50 million.
Hastings and Randolph proposed that Netflix would handle Blockbuster’s online operations, while Blockbuster would take care of the physical stores. However, Blockbuster’s executives, confident in their brick-and-mortar business model, did not see value in Netflix’s digital approach and declined the offer. At that time, Blockbuster believed that its in-store rental business was strong enough to weather competition.
This decision is now viewed as a major missed opportunity, as Netflix went on to revolutionize the entertainment industry by pioneering online streaming. Meanwhile, Blockbuster struggled to adapt to changing consumer preferences and eventually filed for bankruptcy in 2010, marking the fall of a once-dominant brand.
Today, Netflix is worth over $150 billion, making Blockbuster’s rejection of the offer one of the most famous business blunders in history.
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The problem with this, which I here all the time when buying companies, is that if blockbuster did buy netflix, then netflix would not exist as blockbuster would have just integrated into blockbuster..
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Hypothetical 😢
I was telling Blockbuster employees and managers that they were making a huge mistake, by the way they were not loanining DVDs while the return DVDs were being mailed to their mail members. Which they used to do. They looked at me like I didn't know what I was talking about. I said you are going to lose a lot of business, because Netflix was offering a better deal through streaming. 3 months later the store near me was closed. And within 6 months, blockbuster was no more. 😂
If you have to explain the origins of Netflix then you also have to explain what Blockbuster is my man!