While he convinced the board to back his plan, one of his lieutenants, Jim Keyes, led a rear guard action.
Once John Antioco became convinced that Netflix, and to a lesser extent Redbox, was a threat, he used his authority as CEO-as well as the credibility he had earned by nearly doubling Blockbuster’s revenues during his tenure-to discontinue the late fees that annoyed customers and invest heavily into a digital platform to ensure the brand’s future.Īntioco’s article in Harvard Business Review describes what happened next. Yet how he went about doing that sealed his, and ultimately Blockbuster’s, fate. It is not clear whether Antioco’s team did such an analysis or not, but by 2004-six years before the company went bankrupt-he sensed that Netflix had become a significant threat and sought to change his firm’s policies. Still, you can use conventional marketing analysis to evaluate whether an idea is spreading to new groups or just growing within a niche. Duncan Watts, a pioneer in network theory, is quick to point out that social dynamics tend to be idiosyncratic and it’s not always clear exactly where thresholds exist. Unfortunately, this effect is devilishly hard to quantify. As each threshold is past, the next group becomes more likely to adopt the new idea. Once they’re on board, those in the early majority begin to feel comfortable giving it a try. While ideas usually take hold in small niches of innovators, they can often spread to early adopters, who are only slightly more resistant to join in. The best way to understand thresholds is to look at the diffusion of ideas model formulated by Everett Rogers in the 1960’s. Under the right conditions, a viral cascade can ensue. As those who are more willing begin to adopt the new concept, the more resistant ones become more likely to join in. For any given idea, there are going to be people with varying levels of resistance. Network scientists call this the threshold model of collective behavior. And as more of their friends raved about Netflix, the laggards tried it too, fell in love with it and convinced people they knew to give it a shot. Some were reluctant at first, they actually liked being able to browse movies at the store and pick one up at a moments notice, but others jumped right in. Still, customers loved the service and told their friends. People couldn’t just pick up a movie for the night on their way home. Moreover, because its customers received their videos by mail, the service was somewhat slow and cumbersome. Without retail locations, it was hard for people to find it.
While Netflix’s model clearly had some compelling aspects, it also had some obvious disadvantages.
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