Where does the impetus for change come from?
By: Dave Hoffer
Tags: Business, UX, Design, Innovation, Startup

Then along came Netflix.

Excerpt from presentations I’ve given over the last couple of years about how some companies evolve, and others die.

Netflix had a very different delivery model. They started with an online service where you chose DVDs (not VHS) and had them shipped to your house. You watched the video when you wanted, and dropped them back in the mail when you were done, at which time, the next videos in your queue would get shipped. There was no late fee. The smaller, flat DVDs were easily mailed and Netflix likely saved money on real estate — they didn’t have retail locations. When I first tried Netflix, the asynchronous nature of the service was sort of weird. You would set up a queue which you had to manage but often you’d get a movie you had chosen some days after you wanted to view it. Blockbuster provided immediate satisfaction. You popped over to a store, found a movie you wanted to watch, maybe grabbed some food to cook or take-out and that was your evening.

There is a robust podcast on the topic of Blockbuster vs Netflix here. The podcast delves deep into the internal strife that Blockbuster was experiencing, starting with the antagonism between, Carl Icahn, a board member, and John Antioco, the CEO. In 2007, it actually looked like Blockbuster was doing well. Netflix had offered to buy Blockbusters subscribers and subscriptions were going up. They were short of the number they needed to break even though so money was being spent marketing to gain subscribers and a huge sum had been spent to gain parity with Netflix and support their digital presence.

Playing catch-up can be exhausting.

Two years earlier, in 2005, while I was at frog, Blockbuster came to us and wanted to enhance their online presence and the race to parity was their priority.

We pointed out numerous visual issues with their site including:

Page from a frog presentation on the Blockbuster vision we presented.

The Blockbuster ticket logo was set against a blue background which obscured the visual of the logo. It gets lost in that circle graphic.

The dimensional graphics (back then, designers weren’t calling it skeuomorphic) were slower to load, took up a huge amount of screen real estate, and were challenging to render consistently across browsers.

The placement of navigational elements like Movies and Games tabs and the less noticeable ‘sign-in’ link to the right get a little lost in the header of the screen. Sign-in is an important call to action as the sites functionality hinged on subscriptions.

Also, their product was movies, yet look at how small the movie thumbnails appear, in contrast to the rest of the page? There were numerous other issues.

Design is not just what it looks like and feels like. Design is how it works. — Jobs

Importantly, we were more concerned with how the site and service worked, rather than the poorly presented visuals. In a document we shared a number of ideas Blockbuster could implement to surpass Netflix and other competitors.

We specifically told them that streaming was the future and strongly suggested that they should consider this but they flat out refused to see that this was a viable business. And to be fair, we likely didn’t present a cogent business argument or show them a prepared roadmap to make it successful. We told them to “build a destination and community” at a time that was ripe for online social interactions including a “Blockbuster block party” where a group could share a movie and chat about it the next day. We suggested a much deeper categorization of movies in order to encourage more rentals. Movies organized around viewers mood, current events, or collated around actors or directors. These are all standard features today. We suggested multiple users for a single account to delineate content that was inappropriate for certain users which has become a standard feature on all the streaming services today. The key suggestion we recommended was to “leverage Blockbusters physical stores to enhance the movie rental experience.”

This last one would have been difficult to pull off given the trouble they had convincing the franchise owners to participate, but it’s perhaps the most compelling. Blockbuster had a physical presence and Netflix did not. This was very much a service design strategy, but Blockbuster wasn’t prepared to implement this deep a revision. Blockbuster was asking franchise store owners to accept mailed DVDs back into the stores for returns. Not only were the staff not trained for this, the store owners knew that the online service was taking away business. Because the stores weren’t owned by Blockbuster, the store owners resented this.

Back to 2007 and Icahn succeeded in ousting Antioco. His successor discontinued efforts in the online business, instead focusing on the stores. They lasted a couple more years and declared bankruptcy in 2011. Ironically, you can view a documentary called The Last Blockbuster on Netflix.