locadora antigaImagine a typical Friday night back in the 1990s. For many of us, our evening’s entertainment would include one iconic company: Blockbuster Video. Today, the name Blockbuster might bring a feeling of nostalgia. It’s not just the brand, but the memories of hopping in the car, driving to the Blockbuster, and wondering what we’d come home with to watch.

From the first store’s opening in 1985 to its peak in 2004, it grew to 9,000 stores globally, earning nearly $6 billion in revenue. But by then, the end was already in sight. Blockbuster completely missed a major shift in the movie rental business…the launch of a tiny competitor called Netflix in 1997.

Netflix’s business model was simple. Rather than traveling to a video rental store, the company would mail consumers the DVDs they wanted to watch. And in 2007, Netflix changed the game. It began allowing customers to “stream” movies directly to their homes, no VHS or DVD required. Ironically, Blockbuster had the opportunity to purchase Netflix for $50 million in 2000. The company passed on the deal – arguably one of the worst business decisions in history. We all know how the story ended. Given a choice between convenient video streaming or waiting in line at a Blockbuster store, customers signed up for Netflix in droves.

In 2013, Netflix had approximately 34 million subscribers worldwide. In 2021 this number reach 203 million. Blockbuster, meanwhile, filed for bankruptcy in 2010 in a desperate attempt to escape its $1 billion debt load. In 2021 the massive franchise has wilted down to a single store located in a small town in Oregon. Ironically, Netflix recently aired a new documentary: The Last Blockbuster. Hilarious. And for investors in Netflix, the returns were phenomenal.

Anyone who invested back at its 2002 IPO (Stock Market) and held until 2021 has made more than 43,000%. A single $10,000 investment would have resulted in more than $4.3 million today. The story of Netflix and Blockbuster is a great example of what we call a “Digital Leap”.

woman 5915374 1280The digital leap from video rental to at-home streaming is a perfect example, but it’s not the only one. To give another example, we mention a small company called Amazon back in the late 90’s and early 2000 that began a digital leap in the retail space by shipping books to customers, and that rapidly expanded its initial offering to include movies and music… then home improvement products…kids’ toys… and finally office products, electronics, sporting goods, etc. By 2003, the retailer was becoming the go-to place for virtually anything a customer might want to buy. And in doing so, Amazon helped define the e-commerce industry.

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