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Sunday, December 18, 2011

Should The Fed Bail Out Blockbuster?

This week I arrived in my native Nashville, Tennessee after a year away from home traveling throughout this country and abroad. One thing that hasn’t changed about one of my favorite cities in the world is that I’m still allergic to it (*pops another antihistamine*). But quite a few things have changed in just one year. Sitting down to lunch with my family today, my father started asking me questions about Netflix and informed me that there isn’t a single Blockbuster store left in Nashville. They’ve all gone out of business and closed down. In the last year I’ve seen closed down Blockbuster locations all over the United States from Michigan to Virginia, so I wasn’t too surprised to hear that Nashville is now bereft of Blockbusters.

Now when Blockbuster first started, it was an incredibly innovative business concept. Its founder imitated a lot of the distribution and franchising models that made McDonald’s an international fast food success, but applied these to video rental stores. But as we’re all seeing, a business model that created so much value and became such a stellar success beginning in the 1980s, just doesn’t create enough value to remain competitive in the 2010s. It’s been killed off by more efficient and cost-effective business models like RedBox and Netflix, which create more value for their customers by providing cheaper video rentals with a lot more convenience. Yet Blockbuster’s destruction means its employees are losing their jobs and its investors are losing their profits. Should Blockbuster get a bail out?

Read the rest at The Silver Underground.

Wes Messamore,
Editor in Chief, THL
Articles | Author's Page