Some of you are too young to remember late fees.
Late fees involved renting a $3 movie and paying another $6.42 in late fees. Late fees created that pit in your stomach when you glanced over at your coffee table, noticed a blue & yellow Blockbuster video box, and wondered to yourself “Wasn’t that supposed to be returned last week?”
Blockbuster made $800,000,000 per year on late fees. I’m pretty sure I contributed about $100/year to that pile of money, and it made me angry every time. It’s not too far of a stretch to assume that most Blockbuster customers hated their late fees. But solving problems will make you money, and one man’s problem is another’s opportunity. So, a tiny company saw my late fees as an opportunity and did the seemingly impossible: video rental with no late fees.
Wow. What a concept. And that’s where the Netflix revolution began.
When I heard about this video rental company without late fees, my next question was: where do I sign up? I gladly paid Netflix a monthly fee to mail me DVD’s long before Netflix was crowned the world’s largest movie production company.
Here’s the crazy thing: Blockbuster saw all of this unfolding. They could have stopped it. Yes, you know how this story ends, but as the story goes, someone in Blockbuster management with a “C” title (could have been a CEO, CFO, COO, who knows) proposed to their board that they do away with their late fees, as Netflix had done.
The board erupted in laughter. “We ain’t giving up $800,000,000 in late fees, are you effing crazy? We should fire you just for suggesting such…” (this is my fictional account of what happened in the board room, I’m sure they used actual curse words in the real meeting).
Blockbuster could have bought Netflix for pennies on the dollar (just as Yahoo could have bought Google for pennies on the dollar, and the list goes on and on). Yes, hindsight is 20/20, and as Yogi said, “it’s tough to make predictions, especially about the future.” Continue Reading