WEBVTT

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at the time of recording this right now it's

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about 97 degrees outside so I've got the door

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open To my little closet studio here with the

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fan running. So if you hear a fan in the background,

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that's why I Got my pop tart. I Got my zero sugar

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Dr. Pepper Let's get into this week. Shall we?

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When was the last time you left your house just

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to figure out what you were gonna watch Don't

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mean opening an app on your phone or your TV.

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I don't mean scrolling through a menu While you're

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eating leftovers, I mean actually Getting in

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the car driving across town walking into a physical

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building and picking a movie up off the shelf

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Doesn't happen anymore, right? I'm not trying

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to be a smartass here. I'm genuinely asking because

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I was doing the math on myself the other day.

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And for me, it's been shit, something like probably

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probably 16 years. Yeah, about 16 years. Hey,

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everybody. Welcome to the show. I'm Tyler. Thanks

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for hanging out today. Today, we're going to

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talk about video stores, blockbuster Hollywood

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video, the sacred ritual. of the friday night

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run and more importantly what actually killed

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that industry because spoiler alert the story

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you think you know it's not really what happened

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quick heads up before we dive in any further

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as always every opinion here is entirely my own

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it's not my employers it's not anybody else's

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just me so Two completely random things put this

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episode into motion this week first My wife and

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I we went up to Halifax Nova Scotia recently

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and While we were there I ran into my brother

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from another mother my best friend from back

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in Tampa Growing up when did I meet him eighth

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grade? Haven't seen this guy in years like three

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four years so you know we're standing there in

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Nova Scotia laughing about hot dog buns and talking

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about you know my my other friend's dad you know

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some inside stuff and remembering just how much

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you know the three of us myself Nick who I seen

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in Nova Scotia and our other friend James the

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three of us used to annoy the uh the absolute

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hell out of my my parents and and their their

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parents then you know i get back home and i walk

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into you know the the living room here my oldest

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zack sitting there on the couch watching uh what's

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the guy's name jack septiceye i don't know he

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was doing a video where he's playing a a simulator

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game about running a video rental store And I

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don't know something clicked the brainwires crossed.

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I don't question how my mind works. Just just

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roll with it. All right now Look, I I know I'm

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I'm gonna romanticize all of this a little bit.

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I get it the video store was also a place where

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You drove 15 minutes in the rain only to discover

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that every single copy of the movie you wanted

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was already checked out All of them. Empty. Just

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empty shelves staring back at you. I miss it

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anyway. I really do. Is that a, I don't know,

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a rational coherent position? Probably not. And

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yeah, I won't pretend that it is. Because man,

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Friday nights back then, you knew what Friday

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night was going to be. Somebody hit the fast

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food drive -thru, maybe a Little Caesars. Somebody

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went to the rental store and going to the store,

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that wasn't an errand. That was the event. The

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negotiation started the second you got in that

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car and the door shut. In my house, the rule

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was you got two movies and a video game. That's

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how I discovered Toe Jam and Earl. Remember that

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game? from Sega Genesis. And so I came across

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that was just some random game at the store that

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I got that night. But back to the point, the

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entire right over was just everybody aggressively

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positioning one one movie for the adults, one

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for the kids. The game is mine. Meanwhile, my

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sisters are making their arguments. And I'm in

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the backseat quietly keeping score like, you

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know. Like I've been doing since I don't know

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1996 Oh Actually, no, well, yeah, probably my

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youngest sister wasn't born till 97. So yeah

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back to the point it was It was an experience.

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All right, you picked up the box. You turned

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it over you read the back with video games You

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were strictly going off the cover art Which is

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how I ended up renting some genuinely terrible

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garbage But it's also how I discovered a third

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of my favorite games of all time. And then do

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you remember the smell that specific carpet and

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popcorn butter smell of these video stores? Everyone

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who ever set foot in a blockbuster knows exactly

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what I am talking about and literally nobody

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could describe it. Plus there was always a human

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involved there wasn't algorithms and AI trying

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to figure out what you wanted and usually guessing

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wrong But I mean you had some 19 year old kid

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Behind the counter who had I mean to his credit

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He probably seen every single title in that building

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and if you gave him even half of an opening he

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look at you like you were Holding and go hey

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man skip that try this instead Nobody was using

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algorithms that kid just really liked movies

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and like sharing that fact that he liked movies

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And that's usually how you found the best stuff

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anyways, right? Then you get over to the counter

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And it's mom it's it's the moment of truth time

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either you're clean or you owe four bucks from

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three weeks ago that You completely forgot about

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And you can't argue it because it's right there

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on that stupid CRT monitor and your mom is standing

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right next to you. Candy price like, you know,

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straight up felony at the register. Got to pay

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that late fee. I still got a Blockbuster card

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somewhere from the last one that closed around

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here. But the version of this whole, whole saga,

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this whole experience that lives written free

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in my head. This is from a few years later, actually.

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The Hollywood video out in town and country back

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in Tampa. Me and my buddy Nick and my buddy James.

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We'd hit up the store, snag a couple PS2 games,

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head back over to James' apartment, and boom,

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that was the weekend. That's what we were doing

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up until probably Sunday afternoon. I'm pretty

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sure, I'm pretty sure that's where I seen The

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Matrix for the first time, at James' apartment.

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At least that's what I remember. That's what's

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in my head. So I'm going to stick to that. We

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take turns playing GTA 3. GTA Vice City later.

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There was an unwritten rule. You play until you

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died. You get too many stars, the cops finally

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run you down and you pass the controller over

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to the next guy. Everyone just understood that

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assignment. I don't remember too many arguments

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over that, which for three teenage boys is a

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kind of a miracle in itself. In the entire time

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we are absolutely destroying James's dad's, you

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know, pantry. I know we drank all of the dude's

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soda. Eating all of his hot dog buns Nick and

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I talked about this the other day eating all

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of his hot dog buns not the hot dogs mind you

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just the buns and I was trying to remember why

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we would do that and Nick said we were slapping

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spam on their Spam sandwiches fry up some spam

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or whatever else we could find in the cabinets

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Just creating some Frankenstein food out of ingredients

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that were never meant to probably meet each other

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But you know, that's what we did James's dad,

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Mr. Anderson, if you're somehow ever listening

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to this podcast, I'm sorry, man. That dude put

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up with an unbelievable, you know, an unbelievable

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amount of nonsense from us. And I don't think

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any of us ever properly said thank you for putting

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up with us back in the day. That was the hangout

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spot. By the way, those two are still doing this

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stuff. Nick and James. host a podcast called

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Friends Who Pretend. They basically play through

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movies and TV shows as a tabletop RPG. And the

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pitch is essentially, what if we remade this

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movie, but way worse? Half role playing, half

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improv, and the dice decides what happens. It

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was the exact same energy as three kids passing

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that PS2 controller around. Every time someone

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died back in the day Just with way better microphones

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now, so check that out. I'll put a link to the

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show in the episode notes seriously Go check

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them out and give them a listen anyway back then

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you'd end up home and You know the night was

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set. Yeah, you were on the carpet You had your

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pizza and you were going to watch both of those

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movies because you paid for them and you were

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You know, because you had to bring them back

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by Sunday. You only get them for like three days

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or something. The last part, it does matter way

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more than I realized back then, because, you

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know, I didn't know. A leak fee. How much is

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that? You actually finish things not. Also, you

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know, not necessarily because they were good.

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They could. Those movies or games could have

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been absolute dumpster fires, but because you

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paid Your money and the clock was ticking So

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Let's get into a little history here because

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I did a little research on this Blockbuster the

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blue and yellow brand started back in 1985 Had

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one single little store in dallas, texas by 2004

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They had over 9 000 stores in like almost 85

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,000 employees worldwide. That's not just a company,

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that's a small city that happens to rent movies

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and video games. Now, jump back to the year 2000.

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In 2000 alone, Blockbuster pulled in around $800

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million. Just in late fees. $800 million in late

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fees. Remember, you don't get your stuff back

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on time, you have to pay those fees. That was

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roughly 16 % of their total revenue. Yeah, let

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it sink in for a second. 16 % of their entire

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business model was built on their customers forgetting

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to return their stuff. A dollar a day you forget

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to return Shrek on time, you get charged. The

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single most hated thing about the company was

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literally the main pillar holding that place

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together. So what happens? Well, in 2005, Blockbuster

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finally listened to the complaints and they killed

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off the late fees. And they immediately started

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hemorrhaging, bleeding out. In the second quarter

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of 2005, right after dropping those late fees,

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They posted a loss of $57 .2 million. Late fee

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revenue dropped by nearly $138 million in a single

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friggin quarter. They removed the most hated

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part of the business and the whole house of cards

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folded over. It showed everyone what the business

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actually was. Now, here's the part. That gets

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me because I actually used this service back

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in the day, for a little while. Right up at the

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end. My wife and I signed up for that. Do you

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remember Blockbuster Total Access? It was kind

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of brilliant. You got DVDs in the mail, just

00:14:49.240 --> 00:14:53.200
like Netflix. But, and this was the killer feature,

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this is why we went with it, you could take that

00:14:57.740 --> 00:15:01.399
DVD by mail into a physical blockbuster store

00:15:01.399 --> 00:15:04.500
and trade it in on the spot for a movie off the

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shelf That to me was just flat -out better than

00:15:09.179 --> 00:15:14.360
Netflix. I'm sorry. It just was You had the convenience

00:15:14.360 --> 00:15:19.620
of The the mail ordering plus the instant gratification

00:15:19.620 --> 00:15:23.799
of the store Netflix They didn't have anything

00:15:23.799 --> 00:15:25.179
that could beat it. They didn't have any brick

00:15:25.179 --> 00:15:27.879
-and -mortar stores Blockbuster launched Total

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Access in 2006, and for a minute there, they

00:15:31.120 --> 00:15:34.740
were actually pulling in more new subscribers

00:15:34.740 --> 00:15:41.100
than Netflix. So how the hell did it fail? They

00:15:41.100 --> 00:15:46.399
killed it themselves. Every time a customer swapped

00:15:46.399 --> 00:15:52.039
a movie in store, it cost the company about two

00:15:52.039 --> 00:15:58.139
bucks instead of fixing The logistics corporate

00:15:58.139 --> 00:16:04.580
descended into a massive petty war over the CEO's

00:16:04.580 --> 00:16:09.019
bonus. The CEO at the time, John Anico, was pushed

00:16:09.019 --> 00:16:15.600
out by 07. Famous activist investor Carl Egan

00:16:15.600 --> 00:16:25.559
brought in a guy who out of all places used to

00:16:25.559 --> 00:16:29.100
run 7 -Eleven and the new guy immediately pulled

00:16:29.100 --> 00:16:33.679
the plug on total access to protect short term

00:16:33.679 --> 00:16:40.000
margins. The same new CEO literally said in 08

00:16:40.000 --> 00:16:44.500
that Netflix and Redbox quote weren't even on

00:16:44.500 --> 00:16:49.460
his radar. Great call, dude. You got it. You

00:16:49.460 --> 00:16:54.919
hit it right on the head. And then There's the

00:16:54.919 --> 00:16:58.919
side of the story people always forget Hollywood

00:16:58.919 --> 00:17:01.720
video there was other video rental stores out

00:17:01.720 --> 00:17:03.980
there. It wasn't just the blue and yellow guys

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These guys were founded in 88 out of Portland

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by a guy named Mark waddles They had a game crazy

00:17:13.779 --> 00:17:15.839
attached to the back of their stores, which if

00:17:15.839 --> 00:17:20.140
you were a 14 year old kid in the late 90s That

00:17:20.140 --> 00:17:22.299
was the only reason you cared about which store

00:17:22.299 --> 00:17:26.359
you went to. Blockbuster, they tried to copy

00:17:26.359 --> 00:17:29.299
it with something called Game Rush, but Hollywood's

00:17:29.299 --> 00:17:31.640
version was ten times better and we knew it.

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So in December 2004, Blockbuster tries to execute

00:17:41.440 --> 00:17:45.299
a hostile takeover of the rival Hollywood video.

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The FTC steps in. threatens anti -trust action

00:17:50.039 --> 00:17:52.819
and Blockbuster backs off. Ooh, don't want any

00:17:52.819 --> 00:17:56.519
part of that. To protect itself from Blockbuster,

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Hollywood decides to merge with Movie Gallery,

00:18:00.920 --> 00:18:05.500
a smaller chain of stores out of, what is it,

00:18:05.640 --> 00:18:08.960
Dothan, Alabama. The little guy wins, right?

00:18:10.039 --> 00:18:16.680
Well, no. Movie Gallery pays around $850 million

00:18:16.680 --> 00:18:20.750
for Hollywood. takes on hundreds of millions

00:18:20.750 --> 00:18:24.529
of dollars in Hollywood's existing debt. And

00:18:24.529 --> 00:18:28.349
the weight of that transaction eats them alive.

00:18:30.809 --> 00:18:34.089
Movie gallery goes bankrupt in October of 2007.

00:18:34.769 --> 00:18:36.970
They file for bankruptcy again in February of

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2010, liquidate the business and close their

00:18:40.069 --> 00:18:42.809
doors for good that August. 2 ,500 stores gone,

00:18:43.230 --> 00:18:46.450
19 ,000 people out of work. Movie gallery...

00:18:47.500 --> 00:18:49.900
they didn't lose the streaming movie gallery

00:18:49.900 --> 00:18:53.420
won a corporate bidding war in the trophy that

00:18:53.420 --> 00:18:57.140
they got from it a little head on the wall kind

00:18:57.140 --> 00:19:02.859
of thing that's what killed them blockbuster

00:19:02.859 --> 00:19:05.420
filed for chapter 11 bankruptcy a month later

00:19:05.420 --> 00:19:09.759
in september of 2010 and then dish network bumped

00:19:09.759 --> 00:19:14.589
the corpse April 2011 bankruptcy auction dish

00:19:14.589 --> 00:19:18.849
buys what's left for about 320 million they I

00:19:18.849 --> 00:19:20.630
don't know publicly promised they were going

00:19:20.630 --> 00:19:24.329
to keep the 1500 stores open and say 15 ,000

00:19:24.329 --> 00:19:28.349
jobs Cut to November 2013 dishes announced that

00:19:28.349 --> 00:19:31.089
they're gonna shut it all down in the last 300

00:19:31.089 --> 00:19:35.410
corporate stores were closed and the last remaining

00:19:35.410 --> 00:19:42.140
2800 employees were let go Blockbuster Shot itself

00:19:42.140 --> 00:19:47.259
in the foot Repeatedly and with incredible incredible

00:19:47.259 --> 00:19:50.299
enthusiasm too. I might add but dish network

00:19:50.299 --> 00:19:55.079
bought what was left so When I look back on all

00:19:55.079 --> 00:19:58.160
of this a few big takeaways stick with me out

00:19:58.160 --> 00:20:03.740
of this number one The thing everybody hated

00:20:04.669 --> 00:20:08.289
was a structural thing. They knew customers hated

00:20:08.289 --> 00:20:10.589
the late fees, but they kept them because they

00:20:10.589 --> 00:20:13.670
worked. And when they finally took them away,

00:20:15.029 --> 00:20:21.309
the financial floor collapsed. Any time a company

00:20:21.309 --> 00:20:27.130
is making massive profits off you making the

00:20:27.130 --> 00:20:30.730
mistake, that's not a bug. That's a feature they

00:20:30.730 --> 00:20:32.950
will defend right up until the day it destroys

00:20:32.950 --> 00:20:38.200
them. as it did. Number two, debt did most of

00:20:38.200 --> 00:20:41.759
the actual killing. Netflix gets all the historical

00:20:41.759 --> 00:20:44.460
credit for wiping out video stores, but movie

00:20:44.460 --> 00:20:47.160
gallery was lugging around almost a billion dollars

00:20:47.160 --> 00:20:50.559
in debt because two rival chains got into a dick

00:20:50.559 --> 00:20:53.440
measuring contest over who got to acquire whom.

00:20:54.500 --> 00:20:57.299
Blockbuster was equally choked by corporate debt

00:20:57.299 --> 00:21:00.680
from its split with Viacom. When the market shifted

00:21:00.680 --> 00:21:04.440
toward digital, neither company Could really

00:21:04.440 --> 00:21:07.059
move on that not because they didn't understand

00:21:07.059 --> 00:21:08.819
the internet, but because they were leveraged

00:21:08.819 --> 00:21:13.519
to the absolute ceiling and number three we didn't

00:21:13.519 --> 00:21:22.720
Actually escape those fees now, did we? D a lot

00:21:22.720 --> 00:21:28.299
take I don't know D o D e l o i t t e Del o eat.

00:21:28.460 --> 00:21:33.200
I don't whatever just put out a study showing

00:21:33.200 --> 00:21:36.359
that the average U .S. household is now dropping

00:21:36.359 --> 00:21:40.859
about $69 a month on streaming subscriptions.

00:21:42.319 --> 00:21:46.640
On top of that, around 68 % of subscribers are

00:21:46.640 --> 00:21:50.759
now locked into ad -supported tiers, up from

00:21:50.759 --> 00:21:54.500
54 % just last year. That's going to bug me.

00:21:54.519 --> 00:21:56.500
How the hell do you pronounce it? Is it D -A

00:21:56.500 --> 00:22:00.519
-L -A -T -E? Watch this. I'm going to do... We're

00:22:00.519 --> 00:22:02.460
going to do a little Google here while I'm actually

00:22:02.460 --> 00:22:07.480
recording. Doy lot. Oh, I was way off. Hang on.

00:22:07.740 --> 00:22:11.740
How do you say this? I didn't hear anything.

00:22:13.339 --> 00:22:15.420
Oh, I got to change my audio settings. Hang on.

00:22:15.720 --> 00:22:19.799
We're doing this live. We're doing it live. Virtual.

00:22:20.160 --> 00:22:23.480
All right. Deloitte. Deloitte. There we go. All

00:22:23.480 --> 00:22:26.079
right. I was way off. Deloitte. They're the ones

00:22:26.079 --> 00:22:32.279
that put the study up. So. We pay you know It's

00:22:32.279 --> 00:22:34.519
almost like cable at this point. We pay a massive

00:22:34.519 --> 00:22:37.559
monthly fee whether we're using that service

00:22:37.559 --> 00:22:41.279
or not and Then we sit there and we watch the

00:22:41.279 --> 00:22:44.859
ads anyways We used to you know pay two bucks

00:22:44.859 --> 00:22:48.759
one time for a physical plastic tape or a disk

00:22:48.759 --> 00:22:52.099
and We got mad about a dollar a day late fee

00:22:52.099 --> 00:22:55.019
when we messed up now obviously inflation and

00:22:55.019 --> 00:22:57.740
everything else I get it look you know I'm not

00:22:57.740 --> 00:23:02.500
saying The old days were objectively better.

00:23:02.799 --> 00:23:05.920
Rewinding tapes was annoying. Driving across

00:23:05.920 --> 00:23:07.819
town only to find out someone already rented

00:23:07.819 --> 00:23:10.819
the last copy of Gladiator. That was pretty stupid.

00:23:11.619 --> 00:23:15.759
But we traded a model that had clear boundaries

00:23:15.759 --> 00:23:25.920
for a model that has zero edges. And I don't

00:23:25.920 --> 00:23:30.450
think Looking back, hindsight's always 20 -20,

00:23:30.549 --> 00:23:32.529
I don't think we got the better end of that trade.

00:23:34.089 --> 00:23:38.269
The people who made out like bandits on the deal

00:23:38.269 --> 00:23:41.769
were definitely not us, and they definitely weren't

00:23:41.769 --> 00:23:47.349
the 84 ,000 retail workers who lost their livelihoods.

00:23:47.529 --> 00:23:53.089
Which brings me to the actual reason I made this

00:23:53.089 --> 00:23:58.680
episode. I kind of want to open a video store.

00:24:00.299 --> 00:24:03.599
As dumb as that sounds, I'm dead serious though.

00:24:03.880 --> 00:24:07.160
Movies, video games, maybe a slushy machine that

00:24:07.160 --> 00:24:10.519
is slightly broken at times like McDonald's and

00:24:10.519 --> 00:24:14.960
their ice cream machine. A giant, I don't know,

00:24:15.299 --> 00:24:19.420
new release wall you walk up to. If there is

00:24:19.420 --> 00:24:21.819
any disc to actually put on that later, but...

00:24:22.319 --> 00:24:25.359
It may be a shelf right up front for obscure,

00:24:25.700 --> 00:24:27.900
you know, those those uh terrible movies nobody

00:24:27.900 --> 00:24:32.640
else wants to rent but that I like and Whoever

00:24:32.640 --> 00:24:35.539
else works there might like and recommend, you

00:24:35.539 --> 00:24:40.640
know I Would no doubt lose money immediately

00:24:40.640 --> 00:24:47.000
I've accepted this but man I would love to I

00:24:47.000 --> 00:24:48.920
Don't know lose money in a building that smells

00:24:48.920 --> 00:24:52.460
like vintage carpet and buttery popcorn You could

00:24:52.460 --> 00:24:54.980
do some video games, you know, like I'm thinking

00:24:54.980 --> 00:24:58.559
we could, uh, because nobody has a VCR anymore,

00:24:58.839 --> 00:25:01.299
or even a dedicated DVD player for that matter.

00:25:01.359 --> 00:25:05.019
We could rent the hardware, buy up all the VCRs

00:25:05.019 --> 00:25:07.019
and DVD players off of eBay. We could rent the

00:25:07.019 --> 00:25:10.200
machine in, in, you know, have a bunch of old

00:25:10.200 --> 00:25:13.720
movies through, I don't know, seventies, eighties,

00:25:13.900 --> 00:25:16.059
nineties, all the way up through the day, rent

00:25:16.059 --> 00:25:18.500
out games. I don't know how any of this would

00:25:18.500 --> 00:25:23.210
work. I'm just, I'm thinking out loud. But that's

00:25:23.210 --> 00:25:24.970
gonna do it. I've already went too long in this

00:25:24.970 --> 00:25:27.529
episode. That's the show for the week If you

00:25:27.529 --> 00:25:29.369
want to follow along with the podcast make sure

00:25:29.369 --> 00:25:31.289
you hit subscribe wherever you're listening right

00:25:31.289 --> 00:25:34.150
now You can find all other projects over at Tyler

00:25:34.150 --> 00:25:36.930
Woodward .me and hey If you feel like buying

00:25:36.930 --> 00:25:39.130
me a cup of coffee just to support the show you

00:25:39.130 --> 00:25:43.250
can do that at Tyler Woodward .me as well Alright,

00:25:43.250 --> 00:25:48.410
so I had this whole elaborate ending kind of

00:25:48.410 --> 00:25:51.349
written out about nostalgic the nostalgic smell

00:25:51.349 --> 00:25:57.089
of old carpet. Honestly, it was kind of beautiful,

00:25:57.109 --> 00:25:59.269
or at least it looked like that on paper. But

00:25:59.269 --> 00:26:02.170
then I read it out loud and it sounded like a

00:26:02.170 --> 00:26:05.390
bad commercial, so I cut it. Now I've got nothing.

00:26:05.549 --> 00:26:11.049
That's all me. Anyway, be kind, rewind. I'm keeping

00:26:11.049 --> 00:26:13.089
that. That's the ending. I'll catch you guys

00:26:13.089 --> 00:26:13.589
next week.