Today’s news that Blockbuster is filing for bankruptcy should surprise no one, both because its financial problems have been common knowledge for a while, and because Blockbuster has been digitally inept for years in what is clearly a digital era.
Its digital stumbles are legend at this point: From the seeming lack of concern among management to too little, too late efforts to go into digital despite a nimble and fast growing competitor in Netflix (s nflx), there’s no doubt the company, which at one time had a commanding market share and a huge lead in both time and resources, seemed to never get out of digital first-gear despite a long history of false-starts.
But are Blockbuster’s troubles a sign that all large brick and mortar retailers of content — be it music, movies and yes, even books — are eventually doomed? If you look back, signs point to yes. In fact, the death spirals of brick and mortar content retailers have come in waves. First there was music, when Tower Records, which in the ’80s and ’90s had established itself as the leading U.S. music store, shut its doors. Three years later, Virgin Megastores — the biggest music retailer after Tower had left the scene — closed up shop.
The next wave was video, and in 2010, it seems that having actual physical stores felled businesses hard and fast. First there was Movie Gallery, and now the king of movie rentals is going broke.
Is it just digital? In part, yes, but one certainly can’t discount, well, the discounters. The continued growth of the three-headed monster of Wal-mart, (s wmt) Target (s tgt) and Costco (s cost) no doubt played a factor, but I’d argue the transition to digital amplified the competitive threat from the discounters. As digital becomes more important, discounters can make music, video and content a bigger loss-leader by adjusting prices as needed, since the bulk of their sales come from clothing, food and pretty much anything else.
If deadly combo of discounters and digital put the big guns of the brick and mortar, music and video retailers into Chapter 11, are all physical media retailers, such as booksellers, next? Maybe, but it’s not exactly a guarantee. The trouble for brick and mortar media retail is determined both by how fast the transition to digital takes, and how proactive the retailer is in establishing a digital beachhead.
Blockbuster fumbled and fumbled, and ultimately, it was too far behind, as the adoption of video-on-demand and Netflix (s nflx) proved to happen too fast. Barnes & Noble (s bn) appears to be trying to forge a digital strategy much faster (and more cohesively) than Blockbuster did, and while e-reader sales have hit the hockey stick in a big way, some would argue print books aren’t going the way of the dodo bird nearly as fast as the physical media did in video.
Still, I expect Barnes & Noble to see significant challenges in coming years, particularly since Amazon (s amzn) will likely dominate e-book sales, at least in the near term. As with Blockbuster, the combination of a nimble digital rival and costly brick and mortar real-estate weighing down the actual product ties a retailer down. And we all know that what happens when you when you tie a brick to something: it sinks.
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