We have written a paper on business models, and most who write on the subject today focus on how business models are changing, often due to technology. Famously disruptive business models include amazon.com, airbnb, Netflix, Uber, etc. And sometimes changing business models get blamed for the demise of a business, and perhaps invalidly.
We concede that Blockbuster was displaced by Netflix and offer the observation that Blockbuster could have adapted to also offer the video by mail service, which is now morphing to video streaming, and Netflix is on top of it too.
However, while all this is going on Family Video is pulling in $400MM+ per year with fixed location video rental stores and making 10% at the bottom line. According to a recent article on the company in Forbes, the CEO of Family Video says that blaming the demise of Blockbuster and Movie Gallery on flawed business models is accurate, but not for the reasons most believe.
He says it wasn’t the migration to video but rather that they weren’t well run businesses. They had too much debt, poor leases and a flawed revenue sharing model with the studios. He has built a flexible and adaptable business model that succeeds in today’s world for his customers. This includes owning the real estate so he is able to adapt his stores to their changing markets; creating a place where locals want to come for the customer experience and not sharing revenue with the studios.
Is this a niche business? Sure, but 10% profits on $400MM is nothing to sneeze at. To succeed in today’s world you need flexibility, adaptability and the processes in place to facilitate that for you.