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5 Lessons Radio can learn from Blockbuster

Blockbuster once defined the video business.  Now in bankruptcy, it has shuttered thousands of stores and fired thousands of employees.

Flash back 25 years, and Blockbuster was revolutionary.  All the videos most folks wanted – and all in one place and easy to rent. Blockbuster quickly became THE way to experience movies at home.  It became the established way.

The analogy to radio is obvious.  The established way to consume content – check.  Purveyor of the hits most people want most of the time – check. Conveniently located and part of your daily habit – check.  Local to your community – check.  A vast network of outlets nationwide – check.  Thousands of employees and managers all clinging to the status quo – check.

And like radio, Blockbuster drifted into a business model that calcified over the years.  With tremendous scale and tremendous profitability comes a sense that you can do no wrong – that your way is the way, come Hell or high water.  With scale and profitability comes a sluggishness to respond to change and competitive threats.

Competitor Netflix was once a flea on Blockbuster’s butt.  After all, they were the upstart – a virtual company mailing DVD’s to people at home and later, laughably, actually streaming content online.  Let’s see, an industry confronted by a competitor streaming content online…where have I heard that before?

Now Netflix’s profits are up 25% in the past year.  They continue to ramp up deals with the Hollywood content-makers and are likely to offer a streaming-only option soon.  Today, Netflix streaming accounts for 20% of prime-time Internet traffic.

Meanwhile there’s another competitor that brings the best of the Blockbuster experience to a corner near you with even greater convenience and an even lower price:  Redbox.  In the second quarter alone, the “DVD services” revenue of Redbox’s parent corporation were up 44%.

Blockbuster could have responded to all this; indeed it eventually did in efforts that are generally viewed as “too little and too late.”

So back to radio, the established way to consume content featuring the hits most people want most of the time, conveniently located and part of your daily habit, local to your community, with a vast network of outlets and thousands of employees and managers working with a calcified business model.

What are five things radio learn from Blockbuster?

1.  Pay attention to the way habits change

People didn’t wake up one day and start ordering DVD’s online or streaming them direct to their TV’s and mobile devices.  It happened gradually over a decade.  But the habits were changing decisively, and Blockbuster generally ignored them until it was too late.

Like Blockbuster, radio broadcasters proclaim the dominance of their reach and give primarily lip service to the changing behaviors of the listening audience.  When 75 million Americans are registered to use Pandora, you can assume that behaviors are changing and the wind is no longer at your back, radio.  Like Blockbuster, radio’s investments are too little.

One hopes they will not be too late.

2.  Don’t buy your competitor until you invest in your future.

How did Blockbuster respond to weakness in their sector?  By trying to buy their competition, Hollywood Video.  That acquisition fell apart in 2005, well into the growth curve of Netflix.  In other words, Blockbuster focused on buying more outlets like themselves rather than investing in the future consumers were heading towards.

If deal money were available to radio, would we use it to invest in our multi-platform digital future?  Or to buy more radio stations?  You and I both know the answer to that.  Hello, Blockbuster!

3.  Act fast and with commitment

Netflix began renting DVD’s by mail in 1999. Blockbuster introduced an online DVD rental service in 2004.  Naturally, Blockbuster is dwarfed by Netflix in this space.  That’s what happens when you’re five years late to the party.

Redbox began to sprinkle its kiosks around the country in 2004.  Blockbuster created its own kiosk business in 2009. Naturally, Blockbuster is dwarfed by Redbox in this space.  That’s what happens when you’re five years late to the party.

What trends is radio five years late on?  Frankly, what trends are we not five years late on?

The key is not only to act, but to act fast and with commitment.

4. Talk to consumers about the experience they want, not the one you’re giving them

Value is in the eye – and the ear – of the beholder.

Netflix and Redbox are both more valuable than Blockbuster to a growing number of consumers because they offer a different and richer value proposition:  Greater convenience, greater choice, lower cost, greater personalization, etc.  Blockbuster viewed the problem as a “how do we maximize profits from our customer base and get new customers into the store” problem, rather than a “how do we increase the value of our offerings to consumers who can and do have choices” problem.

Today, radio is in a similar dilemma.  Consumers want value, not “radio.” They want music and information content on their terms, not yours.  It is the wise broadcaster who understands the difference.

Do you know how many times a broadcaster has asked me to provide a research-based roadmap to the future consumer for the kind of content radio provides and to map out how that broadcaster can satisfy that consumer regardless of distribution channel?


5. Recognize that you’re not in the business you thought you were in

Part of the reason why Blockbuster was so slow was that they envisioned themselves as being in the “brick and mortar” video rental business, when in fact they are in the business of “distributing entertainment content to consumers any way consumers want it.”

That’s a huge difference with huge implications for strategy and action.

Radio, meanwhile, sees itself as being in the “radio business,” the business of selling spots to agencies to reach listeners who are measured by diaries or meters.

Instead, radio must recognize that it’s in the business of connecting local consumers with clients via the megaphone of the broadcast.  Where these two groups meet and how they meet and what medium brings them together may be propelled by your radio tower, but it is not limited to it.

Yelp and Google Local are growing at your expense.  Groupon is growing at your expense.  Pandora is growing at your expense.

Until you understand what business you’re in, you won’t even recognize your competitor when he steals your consumers from under you.

Hello, Blockbuster.

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