It has been over two years since I last posted on the word-of-mouth lessons learned from bad profits and the battle of Netflix vs. Blockbuster. I wrote a series of three posts on the subject, on Feb. 18, 2006; Dec. 6, 2007; and Jan. 17, 2007.
Yahoo! Finance tells a dramatic story since then. Blockbuster’s total market cap, as of the close of trading on Friday, is $73.25 million. Netflix, by comparison, is worth $2.24 billion. Netflix is worth more than 30 times what Blockbuster is worth. And to think that just two years ago, Blockbuster was worth the same as Netflix, based on Blockbuster’s launch of Total Access (see my Round Two post).
It is worth revisiting my posts (linked to the dates cited above). The lessons of bad profits apply more today than ever. The psychological cost of buyer’s remorse is the highest it has ever been, with U.S. unemployment now at 8.1% (and California’s unemployment rate at 10.1%).
Unfortunately, our entire global economy has been significantly challenged by bad profits, mostly stemming from financial firms’ overly engineered and incredibly complex derivative trading products based on mortage-backed securities to Madoff’s actions that will fundamentally change regulation of the entire hedge fund industry. We will persevere, as we always have, but the costs of bad profits will hopefully be remembered like never before, especially as we live in this age of global connectedness and word of mouth transparency.