“Blockbuster” of an innovation is anything but…

By Eloy Trevino, June 26, 2008 — In a not too distant past, Blockbuster was on the forefront of a convenience revolution — the transition to convenient, in-home entertainment. As consumers built in-home theater systems that rivaled movie theater quality, Blockbuster offered them “convenience” by launching “always in stock” for the hottest DVD rentals. Blockbuster expanded their footprint with highly convenient locations, and was seemingly on a roll.

However, two innovations changed the industry: (1) Disruptive technologies changed consumer behavior (i.e., portable media), and (2) an innovative business model changed consumers’ perceptions of convenience (i.e., Netflix). By failing to adapt quickly, Blockbuster saw their momentum come to a screeching halt.

Blockbuster has since taken some steps in the right direction and the latest “innovation” from Blockbuster appears headed in the right direction at first glance — facilitate consumers’ desire to consume portable media. Sounds good so far! But…

In May, Blockbuster announced plans to launch “in-store kiosks to download full-length movies to portable devices... [which will be compatible] only with Archos portable devices.”

... WAIT!!!! You mean I have to leave my house, drive to a Blockbuster, and use one of their in-store computers to download portable media onto my non-iPod/iPhone device??!?! This innovation fails to execute against the convenience value proposition in every aspect.

While correctly identifying the trend of consuming portable media (albeit 5 years too late), they could not have missed the value proposition by a wider margin. The desire to use portable media is driven by consumers’ desire to have it “when they want it, where they want it, and how they want it;” usually downloading from wherever they may be with a laptop or iPhone. By having a consumer drive to a brick-and-mortar store during normal business hours to download media fails three times over.

Archos is another curious choice. Oh, you’ve never heard of them? You’re not alone. Archos, with less than 2% of the portable media player market, is not in the top five brands. They posted an 18% net sales decline in 2007 despite the launch of their new Archos WiFi 605. That’s right... an innovation that rests its hopes on a partner brand with <2% market share and rapidly declining.

It’s difficult to ignore the fact that over five billion media downloads (audio and video) have been sold via media-download rival iTunes, and Apple has 72% of the portable media market. Not even the “sleek prototype kiosk” will be enough to lure consumers away from the comfort of home, or the convenience of an iPod/iPhone. This is tantamount to launching in-store kiosks for consumer to check their Netscape e-mail accounts during normal blockbuster business hours!

Blockbuster has been stifled by lackluster innovation for some time, primarily by failing to look beyond the brick-and-mortar aspect of their business for inspiration. To bring their brand back to the consumer “big screen,” Blockbuster must seek inspiration beyond existing business models. If not, all that remains is to roll the final credits.