It was a chilly winter morning in 2004. The scene was Stanley, Idaho – a town of 101 residents with a current temperature of minus 17 degrees. My friend, who had lured me here from London, England, handed me a bright red envelope and asked if I could drop it in the mailbox on the way into town.
“What is Netflix?” I asked, looking at the white letters printed on the page. “It’s a DVD in the mail,” he said. “They send you films in the mail. You send them back when you're done. Then they send you another one.” It was a revelation.
While Netflix had grown in the US since its launch in 1998, it would take another eight years for the company to cross the pond. For the rest of the world, movie night in 2004 still meant a pilgrimage to the video store. As a child of the '90s, I spent countless hours sitting cross-legged on the floor of my local video store, searching through the rows of VHS tapes for something new to satisfy my movie obsession.
But those despicable late fees ate up my limited pocket money as I hoarded tapes for multiple viewings. This new system – keep a movie for as long as I wanted without penalty – felt revolutionary. Little did I know that a much larger revolution was brewing.
Fast forward to 2024 and I have more “content” available on one stick than all the blockbusters in London. With just the push of a button (and possibly a credit card number), I can access virtually any show or movie ever made anywhere. It's a far cry from the physical exertion of the pre-streaming era: countless trips to the video store, regular battles of will with the VCR to record every episode Buffy the Vampire Slayerand decoding television programs in magazines and newspapers. (Much harder than it sounds.)
The shift from physical to digital media opened up a treasure trove for film nerds like me. Almost anything, anywhere can be accessed instantly. Still, a touch of nostalgia remains because it was the way it once was. Sometimes a little extra effort makes the reward even more enjoyable.
The Internet – and the birth of video streaming that made it possible – has changed everything about the way we watch movies and even what we see. But I would argue that the moment the video store and physical media began to die came in 2004, when not streaming but another DVD mail-order service was born: Blockbuster Online.
Blockbuster, the world's largest video rental company, was as much of a cultural icon in the 1990s and 2000s as Netflix is today. Much like Barnes & Noble did with the independent bookstore, Blockbuster has blown up small, local video stores by stocking dozens of copies of the latest movies through clever negotiations with movie studios. (It convinced them to sell cassettes for $1 a copy instead of $65 apiece, and get a share of the rental income in return.)
Netflix, meanwhile, was a start-up that tried but failed to sell its movie-by-mail rental business to the big players. Netflix's Marc Randolph and Reed Hastings were literally laughed at by Blockbuster executives, which has now become a cautionary tale taught in every business school.
By 2004, Blockbuster had over 9,000 physical stores in the United States and sales of $5.9 billion. However, they were aware of increasing competition from Netflix, which now has a million subscribers. This year it launched Blockbuster Online. Then it did the unthinkable – it abolished its widely unpopular but extremely lucrative late fees. Combined, these two moves cost the company $400 million. Within a year it had lost 75 percent of its market value; within six years it was bankrupt.
There are many theories as to why this happened, but Blockbuster's ousted CEO John Antioco says it wasn't the rise of Netflix that caused Blockbuster's decline; The company imploded from within. The trouble started out of fear of competition, but Antioco argues that Blockbuster would have thrived in a Netflix world. Unfortunately, Blockbuster's main investor, Viacom, did not agree. It sold its 80 percent stake, setting the company up for collapse.
This leads to an interesting alternate universe theory: If Blockbuster hadn't panicked about the internet and failed to switch to streaming, could it have found a future in which physical media remained relevant? Over time, the death of Blockbuster left a void in movie viewing that both new and established companies jumped into, accelerating the transition from physical to digital cinema. Netflix launched its streaming service in 2007, quickly followed by the creation of Hulu by NBC and News Corp – adding TV shows to the streaming mix. In 2011, Amazon Instant Video (the precursor to today's Prime Video) launched, and the rest, as they say, is streaming history.
Even the remaining physical media eschewed the less expensive option of the U.S. Postal Service. The Disney Movie Club (launched in 2001) grew in popularity by offering CDs full of extra features, behind-the-scenes documentaries and more for families to rewatch endlessly. When I had kids around 2008, I was lured into the cartel-like service with a package of free Disney DVDs and then locked into a monthly purchase.
An estimate on the back shows that I spent nearly $600 on Disney movies during my children's formative years. (Does anyone remember the Disney Vault? A genius concept that made me spend a lot of money I shouldn't have.) The Movie Club closed permanently earlier this year and those DVDs are now gathering dust in a drawer so I can stream almost everything on Disney Plus. Although the streaming service only launched in 2019, Disney's delayed move to digital media was the final nail in the coffin for physical media. When the mouse's house gave way, the game was over.
But the Internet didn't have to destroy the video store. If Blockbuster had handled its pivot with more grace, some semblance of that physical browsing experience might have persisted into the 2020s. Scrolling through Netflix simply doesn't compare to wandering the aisles in search of a hidden gem or tapping into the expertise of the classic video store clerk.
Apparently, like everyone else, I've happily traded late fees and rewind reminders for an extensive library of content I can access from my couch. It's a level of comfort that would have truly blown me away during this cold Idaho winter. But couldn't we have had both? I guess we'll never know. My local Blockbuster is now a wine bar.