If you watch only a few movies a month, Redbox is more economic than Netflix. If you only watch two movies per month, paying $3-$4 at Blockbuster is on par with Netflix.
Sure Netflix economics are great if you already have broadband, have stopped paying for cable TV, and you hate driving to the places where Redbox has kiosks. But if any of those conditions aren't met, Netflix doesn't look quite as genius.
Redbox "proves" that there is still demand for physical media rentals. Blockbuster had a kiosk at my local grocery store for a while and that meant I could return a movie or rent a new one every trip if I so desired at something like $1.50 a pop. That was pretty compelling.
Even more compelling would have been a store with a couple of people who really knew movies and could recommend things and with a deep, deep back catalog. Cutting the customer-facing square footage in half would allow each and every store to pack damn near every movie ever made in. Yeah it might take a guy a minute or three to head to the back and pull the movie you're looking for, but it could be done.
The ownership of the movies is a model that Netflix SORELY wishes they had at the moment. Netflix is publicly traded. And because they're publicly traded it means they have to file financials. And filing financials means a profit & loss kind of statement. And because Netflix doesn't actually OWN much IP, it means they have to rent or lease it. And that means the studios which own the IP that Netflix desperately needs to stay in business are perfectly informed of Netflix's financials. So they know just how much they can squeeze Netflix for every time a contract negotiation comes up.
Blockbuster would not be in the same position because they would own the catalog. Purchases are expensive, but over any 20 year period they might be cheaper than renting.
I disagree completely. There's nothing that would have prevented BlockBuster from doing a few really great things:
1. Get customers email address and email them the day before the day of and every day thereafter a DVD is due with options to renew the rental at some kind of reduced rate right in the email, as well as perhaps some kind of option to buy.
2. Implement a "lottery" system. Blockbuster doesn't hold on to inventory forever, so eventually they sell off old rentals. Occasionally give them away. Give them away at a rate which is high enough to keep people renting, but low enough to not decimate profits. Maybe 1:50 or so? And only movies that are getting sold off anyhow. Some people might "game" this system, but they're renting to do so!
3. Make suggestions. BB had my entire friggin rental history for a couple of years and not once did they recommend anything to me that I might like. Could they have thrown in the occasional suggested rental for free with some other rental I was making? Sure. Even better if it was the first disc of the first season of a TV show; I'd be back for all the rest of the discs of all the rest of the seasons.
These all would have required hiring a CXO (customer experience officer) and giving them a lot of budget and authority to do things which seem like they'd hurt the bottom line for the sake of keeping the company afloat. Would it have worked for sure? Maybe, maybe not. But they would have had a better chance of keeping everything afloat.
Trying to sell me overpriced popcorn and whatever was a total joke; I can get that stuff much, much cheaper at the grocery store. Blockbuster isn't a movie theater than can charge outrageous premiums because customers are trapped once they're on the premises.
But Blockbuster didn't do anything to try and turn their ubiquity and huge collection of data into competitive advantage. So they failed.