Blockbuster Bankruptcy: Indication for Indian Movie Rental Industry?

Blockbuster, world’s one of the largest movie-rental company, filed for bankruptcy in US after failing to adapt its storefront model to online technology pioneered by rivals such as Netflix. The DVD and games rental company filed for Chapter 11 bankruptcy protection, as part of a pre-arranged recapitalization that it has negotiated with its bondholders. With the filing, Blockbuster has wiped out nearly $1 billion in debt and given most of its bond-holders equity in the company instead.

With this comes the end of an era for Brick & Mortar stores like Blockbuster which dominated the home entertainment space with thousands of physical stores for past so many years. The key reasons for this decision were increasing competition from market players offering Online movie rentals, movies delivered to door via post or courier,  DVD vending machines and movies offered via online streaming.

Blockbuster’s early value proposition when it opened its first store 25 years ago was relatively revolutionary, as it provided consumers local access to thousands of movie titles all in one place. It was by no means the first video rental company, but it achieved scale in a way no one else did, using its vast reach to dominate the video rental landscape and drive hundreds of local mom-and-pop video stores out of business.
For many, Blockbuster provided the convenience of a one-stop shop for nearly any video title one would hope to watch. But over the years, viewers and viewing habits have changed in a way that made Blockbuster less relevant. It’s no longer enough to provide users with a way to get content from a store down the street; nowadays, they want access to that content in their living rooms. At first the mail, and then online video gave them that access (via).

So, even a giant like Blockbuster succumbed to the pressure of adaption of digital entertainment content and new age devices amongst consumers. Is it an indication for conventional players of similar industries like movies, music and books who are still driven mainly by their brick & mortar business models? Earlier we read about similar rising trend in ebooks vs. physical books, with Amazon selling more ebooks than hard cover books now.

Many old established publishing players are either migrating to digital sales channels and content or are introducing these as an additional offering. Thinking of Indian market, with Flipkart’s example we have anyways a case in front of us where at least one category i.e., selling of books has moved to online channel to some extent. How about movie rental companies in India? Few startups which started with store model of renting are already not in picture now whereas players like Bigflix who have a mix of online & offline business models have been betting big on retail network and store model until recently.

In India as far as movies are concerned, rental of digital content through legal channel does not seem to be a feasible option in at least near future, reasons are many but prime ones being ever increasing online piracy and broadband connection speeds at most of the places.

Though acquisition channels are definitely being pushed online with companies like Seventymm offering better pricing & discounts to people joining through their online sales channel. With increasing real estate cost, decreasing selling price, availability of pirated movie content either free or at a throw away prices and new releases being offered through other services like DTH, wondering what’s going to be the route which movie rental companies in India would take?

What’s your take on this?

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