Blockbuster Didn’t Lose to Netflix. It Lost to Comfort.
- Nov 5
- 5 min read
Everyone knows how Blockbuster ended: bankruptcy in 2010, a lone store in Oregon, and Netflix dominating the market with 280+ million subscribers. But this isn't a story about missing the future. It's a story about what happens when leadership can't stomach short-term pain, even when the alternative is death.
What Blockbuster Got Right
John Antioco joined Blockbuster as CEO in 1997 and spent a decade making smart moves. By the mid-2000s, he saw Netflix coming and responded aggressively:
In 2005, he eliminated late fees, the most hated part of the Blockbuster experience. This wasn't a small decision. Late fees generated $800 million annually, representing 16% of Blockbuster's total revenue. Walking away from that took guts.
In 2004, he launched Blockbuster Online, competing directly with Netflix's DVD-by-mail service. It wasn't just a defensive play. By the end of 2006, Blockbuster Online had 2 million subscribers and was growing.
In 2006, he introduced Total Access, which let online customers return DVDs to stores and exchange them for free rentals. Netflix couldn't match this. It was Blockbuster's physical footprint turned into a competitive advantage, and it was working. By Q1 2007, Blockbuster was winning the growth battle, capturing most new online subscribers while Netflix's growth stalled. Antioco’s bets were starting to pay off.
Then the board Killed It. Their position was to stop bleeding money on the online business, protect the profitable late fee revenue, focus on brick-and-mortar stores, and get the stock price up now.
Antioco believed the online business was the future and that they needed to sacrifice short-term profits to build that long-term position. If they didn't cannibalize themselves, Netflix would do it for them. The conflict came to a head in 2006 over his compensation and strategy, with Antioco exiting in July 2007.
The board installed a new CEO who had retail experience but little understanding of digital business. His mandate was clear: cut costs, protect profitability, focus on stores.
Here's what the new CEO did:
Slashed investment in the online businesses
Raised prices for online customers
Refocused the company on brick-and-mortar stores
Reinstated late fees in 2010
After the new CEO took over and ended the Total Access program, Blockbuster Online's subscriber base collapsed over the next two years. On September 23, 2010, just three years after Antioco left, Blockbuster filed for Chapter 11 bankruptcy. The company was $1 billion in debt and out of options.
The real problem? It wasn't strategy
What haunts me about this story is that Antioco had the right answer. After leaving Blockbuster, he sold his shares and invested in Netflix. He put his own money on the strategy the board had rejected. In a later interview, he said: "I could see that Netflix was going to have the whole DVD-by-mail market handed to it, along with a direct path to streaming movies into homes."
Antioco further wrote in a 2011 Harvard Business Review article: "I firmly believe that if our online strategy had not been essentially abandoned, Blockbuster Online would have 10 million subscribers today, and we'd be rivaling Netflix for the leadership position in the internet downloading business."
So, what went wrong?
Strategy wasn't the problem, nor was it execution. It was persuasion. Antioco couldn't get the board to see that the status quo, protecting late fees and brick-and-mortar, was actually the riskiest choice.
The “status quo” illusion
This is where Simon Sinek's concept from his incredible book, The Infinite Game, becomes relevant. Most boards and leadership teams instinctively protect what's working today, even when it's killing them tomorrow.
Sinek calls this “finite thinking,” when leaders are so focused on protecting today's revenue that they sacrifice tomorrow's survival. Blockbuster's board couldn't stomach losing the revenue from late fees in the short term, so they lost the entire company in the long term.
But I also completely get it. The $800 million was real revenue, and the online business was losing money. Total Access had a net loss of $2 per customer exchange, a deliberate investment to build market share just like Netflix had done, but the path to profitability was still unclear. So, in the moment, Antioco’s strategy likely seemed scary and self-destructive.
But here's what the board missed. The status quo had hidden risks they weren't addressing head on:
Netflix was growing 40% year-over-year
Customer satisfaction with Blockbuster was at all-time lows (people hated late fees)
The DVD-by-mail model was proving itself
Streaming technology was emerging
What Antioco needed to do but didn't
1. Quantify the risk of doing nothing: If they kept late fees and ignored online, show the customer loss trajectory. Make the decline visible, specific, and undeniable.
2. Reframe the conversation: Stop arguing “change vs. stability.” Start arguing “controlled change vs. forced change.” They weren't choosing between transformation and safety, they were choosing between transforming on THEIR timeline or being forced to react to someone else’s.
3. Build the revenue bridge: Illustrate late fee revenue declining, the Total Access/Online revenue growing, and the crossover point. Give them a roadmap, not just a leap of faith.
The right way…A story I witnessed
Contrast Antioco's failure with a situation I witnessed firsthand when a COO got it exactly right. I was working at a digital sales company where we sold home services to customers during a move, and the COO recommended we stop selling newspapers during these mover calls. This represented a small portion of our revenue, but it was still revenue at a critical time for the business. Leadership immediately resisted with the same arguments Blockbuster's board probably used:
"We need that revenue."
"Newspapers help us sell other products."
“It gives our customers more choice and a better experience”
"This is too risky."
But this COO didn't continue to debate the strategy. Instead, he took 300 recorded sales conversations home and spent the weekend analyzing them. He came back with undeniable data. I was in the room when he presented his findings, and you could have heard a pin drop.
The assumption that customers "wanted newspapers” and that they “helped us sell other products" was disproven with data. Customers didn't mention newspapers in their decision making, and when they did buy the product, it was a forced sale that added unneeded handle time to the call. The product was not only dead weight, it was suppressing other revenue and increasing our call center costs.
He then quantified what we'd lose and what we'd gain. He showed the path forward. Armed with data, not just opinion, he got buy-in. We stopped selling newspapers and eventually saw very positive impacts, not the least of which was a better customer experience which allowed us to sell our services to more businesses.
That's the difference, he used the evidence to reframe the situation. Making a change wasn’t the risk, doing nothing was.
The Lesson for Today's Leaders
Boards and senior leaders rarely kill their own golden goose. Not because they're blind, but because current revenue is real and future opportunity feels theoretical.
Lesson #1 — See reality before the market forces you to.
Blockbuster didn’t fail because the future was unclear. They failed because the present felt safer. Antioco saw what was coming, but the organization wasn’t willing to endure the pain in the short term to survive and thrive in the long term.
Lesson #2 — Strategy isn’t enough. You must win the narrative.
Antioco wasn’t wrong on direction, he was wrong on persuasion. When you see a necessary pivot, your job shifts to:
Making the invisible visible
Quantifying the cost of doing nothing
Helping leaders choose discomfort over decay
As Andy Grove said: “You have two options — adapt or die.” The COO in my story adapted. Antioco, however, never got the chance.
Don't let that happen to you.
