Paul L. Caron

Wednesday, May 27, 2015

Would Tenure Have Saved Blockbuster?

BlockbusterInside Higher Ed:  What If Blockbuster Had Had Tenure?, by Joshua Kim (Dartmouth):

The case of Blockbuster offers one of my favorite thought experiments for higher ed. In 2004 Blockbuster boasted 9,000 stores worldwide, 60,000 employees, and a market capitalization of $5 billion. Today, Blockbuster is gone. ...

We don’t want to be the next Blockbuster.

Did you know that Blockbuster had the opportunity to buy Netflix for $50 million? Netflix today is worth about $35 billion. In the early 2000s Netflix was having real challenges gaining enough scale to achieve economic viability, a financial situation that pushed its co-founder Reed Hastings to try to negotiate a sale to Blockbuster.  

The fact that Blockbuster said no to the purchase must rank as one of the dumbest business decisions of all time.

The story of Blockbuster and Netflix leads me to a question — a question that I think is relevant to our higher ed world.

What if some employees at Blockbuster had had tenure? ...

Would the tenured Blockbuster employees have spent their organizational capital and job security to argue against the decision of management not to buy Netflix? ...

Could tenure have saved Blockbuster?

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The problem is that the tenured employees would metastasize into a left-wing, self-dealing, politically motivated cancer on the organization and would in no way encourage diversity of thought that you are suggesting. After all, what is the opposite of diversity? University.

Posted by: TJA | May 29, 2015 3:53:24 AM

Nothing drives competitive innovation like removing the threat of competition. /Sarc

Posted by: Mr. Feverhead | May 29, 2015 2:43:09 AM

At the time, Netflix's model was you gave them a list of movies and they sent them to you in order, sending each one when you returned the previous one. No pasrticular reason for Blockbuster to have been interested in that. Netflix's big success came with a new business model of streaming over the internet and producing some of their own content, enabled by the spread of hi-speed internet. No reason to think that if Blockbuster owned Netflix, they would have come up with that.

Posted by: MHJ | May 28, 2015 9:55:32 PM

Technically, Blockbuster isn't gone. It was purchased by Dishnetwork and provides video streaming services similar to Netflix.

Posted by: Mike | May 28, 2015 9:44:23 PM

A better question would be: would tenured professors argue against the administration and save their school? So far the answer is no.

Posted by: denny | May 28, 2015 8:39:16 PM

Blockbuster's success with the last paradigm led to organizational resistance to the changes it needed to make to survive. Its a problem all large organizations face.

Posted by: Stephen Gordon | May 28, 2015 8:16:35 PM

I read an interview with some of the executives at Blockbuster, and they were asked what kind of movies they liked. And the answer was, uh, we don't really see many movies, everybody works till at least 9 or 10 every night.

And I knew they were doomed. Of course executives all work crazy hours, but if you have the kind of culture that wants to see your butt in the office every night, whether you really have work to do or not, so that you can never experience your own product, and have the insight of any customer who walks in the door... well, you're just dumb. And toast. Instead, of course, the owner went out and bought a sports team, and lost his company because it was just widgets to him.

Posted by: Michael Gebert | May 28, 2015 7:42:36 PM

They would just have ruined Netflix, too.

Posted by: Kevin M | May 28, 2015 7:40:48 PM

It's probably better for us that Blockbuster did not buy Netflix. Blockbuster's corporate pricing mentality just didn't work. They always charged more for "value" which really didn't amount to much. They priced themselves out of their markets and made themselves obsolete and unable to compete. That said, maybe a national pricing structure would have worked, but their pricing structure would have spawned numerous other Netflixs and the same thing would have happened to them....eventually.

Posted by: greg | May 28, 2015 5:33:06 AM

In this case, Blockbuster's management didn't need the assistance of tenured employees. They were already sufficiently stupid.

That said, apart from government subsidies, there's nothing that can override the 'we have no money' problem. The same trouble is going to hit many public employee pensions in a few years. By answer is that they get what those cities and states can plan. As unions, they had the in-house expertise to know what they were demanding was impossible.

By the way, 'just in case this takes off' is my explanation for Apple's plunge into smart watches. The technology is clearly not up to the needs of users. Battery life is dreadful and it's little more than an accessory screen for iPhones. But by marketing it, Apple is readying itself for the market, should it take off. That's the equivalent of Blockbuster buying Netflix "just in case."

Posted by: Michael W. Perry | May 27, 2015 1:25:31 PM