The REAL Reason Behind the Demise of BlackBerry, Blockbuster & Borders

22nd Oct 2021
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What do BlackBerry, Blockbusters and Borders all have in common? Aside from alliteration and their popularity in the ‘90s, I mean?

Each of these companies rose to an incredibly lofty height and then fell, quite spectacularly, from grace. They were all thriving during the ‘90s, but by the ‘00s, it was all over.

Why?

Let’s find out…

The death of Borders: How come they died, but Waterstones survived? 

Remember “Once upon a time at Borders…”? The chain of high-street book shops that once rivalled Waterstones? It was founded in 1971, and with over 1,200 shops across the world, during its peak in 2003 Borders made a healthy profit of around £64 million.

But, just eight years later in 2011, they closed 399 stores, laid off 10,700 employees and then went bankrupt.

What the hell happened to Borders?

Borders failed to accept the e-book 

When the Amazon Kindle came out in November 2007 its rising popularity prompted others to launch their own e-readers: Barnes & Noble debuted ‘’Nook’’ in 2009 and Apple launched the iPad – with e-book capabilities - in April 2010.

What did Borders do in response to the demise of physical books and the rise of e-books?

Nothing.

Well, they did do something: They launched the “Kobo” e-reader. But, unfortunately for them, it came out three years after the Amazon Kindle and a few weeks after the Apple iPad.

Talk about poor timing.

Borders' one salvo against the increasingly digital book universe was about two years too late.” – CBS News

Borders failed to predict and respond to the rise of the e-book, like Amazon, Barnes & Noble and Apple did, so they got left to gather dust on the bookshelf.

Borders failed to go digital

Coinciding with their failure to take the e-book seriously, Borders also failed to take the impending digital revolution seriously.

Borders was the only major book retailer that was almost completely dependent on people getting in their car, going to their store, and purchasing a physical book.” - CBS News

They did have an online presence, but every time you visited borders.com, you would be redirected to…. Amazon! Yes, they made the bizarre decision to outsource all their online sales to Amazon, which basically meant they gave all their customers to a bigger, better brand. And, surprise surprise, those customers never came back.

Borders failed to diversify

When you walk into Waterstones, it’s an experience, isn’t it? You can get a coffee, snuggle up on a beanbag or listen to a reading from a famous author. In other words, Waterstones has diversified. They’ve turned their physical stores into multi-functional spaces where people go to not only buy books, but to also relax, have fun and attend events.

Borders failed because it had no other revenue stream aside from physical books.

Well, they did start selling CDs and DVDs in the ‘90s, but of course, we all know how that story goes: With the arrival of music and video streaming services came the death of the CD and DVD.

In the 1990s, it invested heavily in CD sales. Bad move: Around then, people stopped buying CDs as they began buying iPods instead.” - Slate

The demise of BlackBerry: They HAD the smartphone market in the palm of their hand

With its revolutionary QWERTY keyboard; its never-seen-before instant messaging platform (BBM); its impenetrable security software, and its ability to send and receive emails, in the ‘90s BlackBerry controlled 50% of the smartphone market in the US and 20% globally.

Having a BlackBerry symbolised high-status, and they became incredibly popular amongst politicians, high-flying entrepreneurs and the rich and famous. The first BlackBerry launched in 1999, but by 2007, the company was making more than $3 billion in revenue with a net income of $631 million. And, during its peak year in 2011, it sold over 50 million devices.  

There was a time when Blackberry was considered as the absolute nuts, and it became a sign of status in society.” – Feed Dough

Fast-forward five years and BlackBerry had lost its place in the smartphone market. They’d stopped manufacturing devices, they had to terminate 4,500 jobs, they only had 23 million users left (compared to the 85 million they had in 2013) and, out of the 432 million smartphones sold worldwide, only 207,900 were BlackBerry devices.

This meant that BlackBerry’s share in the smartphone market was officially at 0%.

How did BlackBerry mess it up so badly? 

BlackBerry failed to launch a touchscreen device quick enough

BlackBerry was the first to launch a smartphone that gave users a desktop-like typing experience and the ability to send and receive emails. And they were the first to launch an instant messaging platform (that consequently led to the development of iMessenger and WhatsApp). But they weren’t the first to launch a touchscreen device. And that was a big mistake.

When Apple first introduced their touchscreen device in 2007, it was revolutionary. The iPhone was something customers had never seen before, and people soon started finding touchscreen devices more advanced and more attractive. While BlackBerry stuck with their iconic physical keyboards, Apple was going from strength to strength with their full-touch-screen devices that enabled users to access the internet, download apps, take photos and record videos.  

BlackBerry insisted on producing phones with full keyboards, even after it became clear that many users preferred touchscreens, which allowed for better video viewing and touchscreen navigation.” – Business Time

BlackBerry stubbornly refused to build a full touchscreen device until over a year after Apple did. But by then people were already tied into Apple and Samsung who were streets ahead. It didn’t help that the touchscreen device that they eventually did build, was a major flop amongst touchscreen advocates. It had software issues, came with no Wi-Fi support, and users were limited to the number of apps they could download: It was a “poor imitation of the iPhone.” 

While BlackBerry eventually opened up its app store to more popular apps, the damage was already done.” – MUO

BlackBerry failed to listen to customers 

Part of the reason why BlackBerry failed to launch a touchscreen device quick enough, was because they refused to listen to what customers wanted. 

They were more concerned with protecting what they already had: A smartphone that was highly respected throughout the ‘90s and still admired within the IT departments of the large corporate giants. They were committed to making phones for this niche customer base and didn’t care to accommodate for the mass consumer markets.

In their eyes, they’d designed and built a great phone that worked perfectly well for their corporate customers. They didn’t need to invest in new, flashier upgraded models with more bells and louder whistles like Apple and Samsung did. They believed in making small improvements, mainly to their security software capability, over time. 

They would add small features over time, but they weren't shooting for big, sweeping changes that would shock and delight consumers.” – Business Insider

Therefore, their devices didn’t have any of the features that Apple and Android smartphones had, that customers liked, like a front and back camera, for example.

While BlackBerry was resting on its laurels atop the corporate mobile market, Apple and Google were laser-focused on the consumer market, which they correctly predicted would drive smartphone adoption.” – Business Time

The fall of Blockbuster: And it wasn’t JUST because of Netflix

Do you remember browsing up and down the aisles of Blockbuster, endlessly searching for the perfect Saturday night film? I, for one, spent many happy hours in Blockbuster. With a new store opening every 17 hours, over 9,000 brick-and-mortar stores worldwide and 65 million registered customers, Blockbuster reached its peak in the mid to late ‘90s.

Once valued as a $3 billion company, in just one year, Blockbuster earned $800 million in late fees alone.” – Business Insider

But by 2010, it was all over. They were down to just one store (which still exists), they were in a serious amount of debt, and they had no choice but to file for bankruptcy.

While most of us would automatically assume that it was the arrival of video streaming services like Netflix that killed Blockbusters, it wasn’t all their fault.

Most people think Blockbuster went out of business because of Netflix, but that’s not the whole truth.” - Tom Casey, former CFO of Blockbuster

Blockbuster and Netflix were evenly positioned to grow in the mid-2000s. During that time, Blockbuster was established, they had stores all over the world and had diversified into a ‘by-mail’ business. Netflix also had a ‘by-mail’ business (that’s how it started), but it was in its early stages and, although they had a small digital business too, they didn’t have much to offer.

At that time anyway…

So how did Blockbuster manage to lose everything and how did Netflix grow into the $28 billion company we see today? 

Blockbuster failed to take the digital revolution seriously

This is a similar story to BlackBerry in that Blockbuster were so content with their position at the top of the tree, as the world’s number 1 video chain, that they failed to take notice of what was happening around them.

They were so focused on their brick-and-mortar stores and developing new ways to track late returns, so they could keep benefitting from their lucrative late fees, that they failed to see that the competition was on the rise.

They were too busy making money in their video stores to imagine a time when people would no longer want or need them.” – Business Insider

But they didn’t sit back and do nothing. When they eventually cottoned on to the increase in competition, their response was….to open more physical stores and new rental kiosks. But all these attempts to beat the impending competition were based on outdated technology.

They failed to grasp that the next generation, who didn’t grow up with physical CDs and DVDs, were gravitating towards digital, on-demand, streaming services like Netflix. Blockbuster was stuck in the past. As the popularity of streaming subscription services became more mainstream, Blockbuster, with their thousands of worldwide stores, found they were haemorrhaging money on extortionate rents and rising overheads. Plus, their DVD postal service was also starting to lose traction: Who wants to wait days for a DVD to arrive when you could get it within minutes?

They did try to scramble into the digital world, but by then, it was too late. 

Its foray into video-on-demand streaming came too late, and over the next three years, Blockbuster died a slow and painful death.” – Business Insider

Blockbuster failed to keep up with the changing marketplace

Following a similar pattern to the above, Blockbuster had its head firmly buried in the sand when it came to listening to what their customers wanted.

They made an extortionate amount of money from charging customers late rental fees. In fact, in just one year, Blockbuster earned $800 million in late fees alone. Charging for overdue videos rentals was a pet peeve for many customers, but it was a huge part of the Blockbuster revenue model, and it was what kept their physical stores going for years.

But inevitably, it was also to become a huge part of their downfall.

Along with the arrival of streaming services came video subscription models. Netflix, with no physical stores to pay for, realised that they could afford to offer their customer more variety, instant access to titles and, instead of charging customers for videos, they could offer them on a monthly subscription. This made charging for the late return of videos unnecessary.

Netflix didn’t penalise their customers. This made them the preferred choice with customers.

Netflix proved to be a very disruptive innovation because Blockbuster would have to alter its business model—and damage its profitability—in order to compete with the start-up.” - Forbes

The moral of these stories…

So, there you have it: Three sad stories about the demise of three truly great brands.

The lesson we can learn from these three examples is that all businesses must continue to innovate to stay alive. The size, scale and reputation of a business doesn’t make it invincible in today’s overcrowded market.

If your business doesn’t innovate, you’ll see young, upcoming companies bringing new ideas into the marketplace, and you’ll find yourself on the back foot, scrambling to keep up.

We’ve all heard the phrase “adapt or die” and for businesses to achieve success in today’s modern world, this is a universal truth.” – NorthEastern

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