Posted by: crudbasher | August 27, 2010

What Blockbuster Can Teach Higher Ed

There are two interesting stories for today that can be tied together.

Blockbuster goes bust

First Blockbuster as announced it will go through bankruptcy in September.  I don’t think many people are surprised.  Netflix is eating their lunch.  Interestingly Netflix started in 1999 so it took 11 years to smash the video rental model.  I think this would go faster today because the net has evolved so much since then.

Blockbuster is in trouble because they are selling a information based product that can be much more cheaply distributed via mail and the Internet.  In addition they have a very large, very expensive physical infrastructure.

Movie theaters are doing great!

The second story is about how movie theaters had a great year.  They made more money because they jacked up their ticket prices.  This was because of 3D largely.  I see this as a last hurrah for the movies because of home theaters.  They are pricing themselves out of the price range of many families.  Why drop $50+ for a family of 4 when you can watch it at home a few months later for $4? Again, their product can be distributed via Internet, and they have a very large, expensive physical infrastructure.

This is starting to sound familiar.

How this applies to Higher Education

Higher Education has operated for the last 100+ years as a physical place you had to go to in order to get information.  You can now get that information over the Internet for much less cost.  It’s also much, much cheaper to take classes online, not only in tuition but in living expenses.  Not only that, but many schools have a very large, expensive physical infrastructure.

Is taking a class online the same thing as going to the school physically?  No not really. But is it good enough?  You can say the same thing about movies.  Is watching a DVD at home the same as in the theater?  No. But is it good enough for drastically lower prices?  Many people are saying yes.

Many colleges are living on tuition from year to year now with not many reserves.  They are so invested in fixed costs like buildings that they can’t lower costs enough to compete with online learning.  What happens when students decide that online is good enough? Poof! The higher education bubble bursts.

My message to universities is this:  What are you selling that is worth what you are charging? It doesn’t matter if you think it’s worth it, it matters if students think it is, and the times are changing.

  • Kaboom! Blockbuster goes bankrupt

    tags: technology obsolete business model disruptive

    • Blockbuster is on the verge of declaring bankruptcy under the weight of competition from Internet services,
    • The move would give it a chance to reorganize, offloading at least some of its $920 million in debt and letting it out of lease requirements for at least 500 failing stores
    • Blockbuster’s fall has been years in coming but has accelerated rapidly in recent months as it has been overwhelmed by Internet-based competitors, most of all Netflix. The failing company has a small Internet video service backed by CinemaNow but also has the burden of a primarily store-based rental system; its stores can only carry a limited amount of stock and are tied to a per-movie rental system. Netflix has its own, more popular Internet service and for physical copies isn’t tied to expensive stores with limited stock, instead providing a much wider selection through the mail.
  • US movie tickets get biggest price hike in historyAnnotatedThe last hurrah for the movie businesstags: technology movie pricing tickets
    • “Theater owners have gotten away with the biggest year-to-year increases in ticket prices ever,” says Hollywood-focused publication The Wrap, “with average admission costs spiraling upward more than 40 cents in 2010, or over 5 percent.”
    • The biggest increase in ticket prices, ever, and in the midst of the worst economic downturn in 50 years? Business execs everywhere have just one question: how do the movies manage it?
    • Much of the credit/blame goes to 3D, a novelty that has recently accounted for higher ticket prices.
    • As The Wrap noted, “it’s becoming increasingly evident that exhibitors are close to maxing out consumer patience.”

Posted from Diigo. The rest of my favorite links are here.

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Responses

  1. “Bankrupt after Internet pressure”

    In other words, Netflix kicked Blockbuster’s butt…

    • Yeah it’s kind of annoying but my original post got eaten by Diigo. 😦 I am rewriting it.

  2. […] just ran across this posting on educationstormfront — What Blockbuster Can Teach Higher Ed If you enjoyed this article, please consider sharing it! Tagged with: disruption […]

  3. Right on…I saw your posting after I had posted one myself on this same topic. I even put an addendum on that posting to direct folks here.

    Unfortunately for many, you’re right on the mark.

    See:
    http://danielschristian.com/learning-ecosystems/2010/08/27/well-there-goes-another-one-who-discounted-the-impactvalue-of-technology/

  4. We are moving fast, there is just no excuse for assuming that your old model will continue working just because it has worked in the past. The problem is that these companies are reactionary and aren’t generally reacting until it is too late. I fear that higher ed will meet the same end because they aren’t actively working out a way to stay relevant before they aren’t anymore. Reactionary won’t cut it in this world, innovation is where it is at.


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