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"The decline in newspaper ad revenues to a 60-year low is amazing by itself, but the sharp decline in recent years is stunning. Last year's ad revenues of about $21 billion were less than half of the $46 billion spent just four years ago in 2007, and less than one-third of the $64 billion spent in 2000."*
*Source: Dr. Mark J. Perry, professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. http://www.mjperry.blogspot.com
What I find interesting about the story behind this infographic isn't that Netflix gave Blockbuster a big push into bankruptcy, but that Netflix's current revenue is only one-third of what Blockbuster's revenue was in 2004. Did Neflix win the battle but lose the war - was there a better way to grow the industry?
Although Netflix accounts for 20% of all downstream Internet traffic between 8 PM - 10 PM and is now the #2 video subscription service behind Comcast, the bigger story to me is the continuing fragmentation of devices on which video is being consumed, as show in the second graphic below.
Source: HolyKaw.Alltop.com and DailyInfographic.com; click on images to enlarge
LinkedIn was valued at $8.5B today on its IPO, or more than 500 times earnings.
The networking site raised $352.8M yesterday by selling 8% of the company (7.84M shares) for $45 a share, but valuations quickly doubled this morning on the open market as shares traded at $90 apiece.
"Battered by competition from Internet retailers and burdened with debt, Borders Group Inc. filed for Chapter 11 protection Wednesday with plans to close about 30% of its stores and emerge with a new focus on e-books and non-book products...."
"Whether it can emerge as a stand-alone company will depend in large part on... growing Borders.com and making itself a destination for e-books, the fastest growing segment of the book-publishing business."
From The Wall Street Journal, February 17, 2011; Page B1
Marvin Gaye and Tammi Terrell sang "ain't no mountain high enough, ain't no valley low enough, ain't no river wide enough, to keep me from getting to you."
Unfortunately the music industry is not as resilient nor everlasting as love, and the disruptive forces buffeting it have pushed sales back to levels not seen in more than 20 years. As you view the chart below, keep in mind that Musicland declared bankruptcy in 2006 and Tower Records shuttered their last 89 stores the same year; Virgin closed their U.S. Megastores in 2009.
"Remember the day, I set you free I told you, you could always count on me, darling. From that day on, I made a vow, I'll be there when you want me, someway somehow." Ain't no mountain high enough, indeed.
Infographic comparing Facebook's valuation with other tech/digital companies.
FastCompany published a fascinating timeline covering key moments in the rise and fall of Blockbuster (abbreviated version below). Business resilience is not guaranteed, and the Blockbuster story brings this reality into striking relief.
1985: First Blockbuster store opens in Dallas.
1994: Viacom acquires Blockbuster for $8.4 billion.
1997: Reed Hastings returns Apollo 13 to Blockbuster six weeks overdue, and is dismayed by the $40 late fee.
1998: Reed Hastings founds Netflix.
1999: Viacom holds Blockbuster IPO, valued at up to $4.8 billion.
2000: Blockbuster declines offers to purchase Netflix for a mere $50 million.
2002: Blockbuster debuts Super Bowl ad. The company posts a $1.6 billion loss.
2003: Netflix posts first profit, earning $6.5M on revenues of $272M.
2004: Blockbuster enters online DVD rental market.
2005: Blockbuster launches a marketing campaign touting its new "No Late Fees" policy. Subsequently, 48 states launch investigations into the program, charging Blockbuster with misrepresenting its late fee policy to customers. Blockbuster settles for $650,000.
2006: Blockbuster, now valued at $500 million, surpasses its goal of two million subscribers for its online platform. Netflix reaches 6.3 million subscribers by December.
2007: Blockbuster hires new CEO Jim Keyes. Keyes decides to roll back the company's Total Access plans. "Clearly our spending on that one channel was exceeding our returns," he said during a company earnings call. After losing a half-million subscribers in the third quarter, Blockbuster announces it will no longer report its subscriber count.
2008: Jim Keyes: "I've been frankly confused by this fascination that everybody has with Netflix...Netflix doesn't really have or do anything that we can't or don't already do ourselves."
March 2010: Blockbuster reinstates late fees, which had been costing the company $300 million in revenue annually.
May 2010: In an interview with Fast Company, Jim Keyes is asked whether Blockbuster's financial troubles were due in part to Netflix's success. "No, I don’t know where that comes from," he says. Keyes denies his company is going bankrupt.
July 2010: Blockbuster launches Droid X app. Blockbuster is de-listed from the New York Stock Exchange after shares hit all time lows.
August 2010: Though ailing from a debt of $900 million, Blockbuster's head of digital strategy explains, "We're strategically better positioned than almost anybody out there. Never in my wildest dreams would I have aimed this high." Blockbuster adds video games to by-mail subscription plans for no additional cost, but neglects to mention that new releases will not be available for three months.
September 2010: Drowned in revenue losses of $1.1 billion, Blockbuster files for bankruptcy. The company is valued at just $24 million.
Should have read this 20 years ago, but still a powerful story.
Barbarians At The Gate reinforces my belief that regardless of a company's size, change only happens when the right combination of people - and not always the top people - align to act.
And that in and of itself doesn't always guarantee that good things will transpire.
Still, it is impossible to overstate the inherent power of informal networks of influential people.
