(Update: Revised post to fix an unconscionable number of grammar mistakes.)
Blockbuster video declared bankruptcy earlier this month. It didn't come as a surprise to anyone.
Back in the 80's Blockbuster emerged as the dominant player in the new videotape rental market. Blockbuster successfully drove much of the independent rental shops out of business despite the fact that the independent shops held a big advantage -- they rented porn. But, Blockbuster had more capital and were able to stock more recent releases, which were in high demand by most consumers. By 1994 Blockbuster was worth $8.4 billion and blockbuster brick and mortar stores dotted the landscape. Blockbuster had achieved monopoly power in their industry.
The problem with having monopoly power is that companies often begin acting like a monopolists,begin rent seeking, and offering the product they want to sell as opposed to the product the customer wants to buy. Blockbuster fell right into this trap by, among other things, adopting strict and onerous late fees policies, skewing their movie selecting to new releases, and drastically limiting the available selection of older movies (the long tail). They also became content in their position of dominance and sluggish in adopting new technology, such as switching over to dvds and taking advantage of the Internet.
Our public schools are stuck in a Blockbuster world. Public schools exist to serve themselves, not their customers -- the students, parents, and the public. I have profoundly different views than some edu-pundits, but the one thing we tend to agree on is that the students, parents, and the the public are not being well served by the public schools, though we disagree on the means and ends of the needed improvement. Almost no one believes that public schools are using technology effectively, for example.
Blockbuster had settled into a mode of business that was good for Blockbuster and not so good for consumers. Public Schools have done the same. The only real difference is that public schools are immune to market forces and can only be dislodged from their heavily entrenched position via political forces. Good luck with that.
Blockbuster, in contrast, was not so insulated from market forces. It didn't take long for other providers to enter the market and begin providing the products and services consumers wanted. Look at what happened.
Netflix and other providers ate Blockbuster's lunch in less than ten years. Netflix won for the simple reason that they offered a better service. No late fees. No trudging out to the local store with it's limited selection to return movies. No limited time period for watching the movie you just rented.
That must have been incredibly disruptive to Blockbuster's "stakeholders." But, did you read any tearful op-eds about how the institution of Blockbuster must be saved to protect the public good of readily available video rentals? Either did I.
Winner(s): Consumers and Netflix (as long as they stay ahead of the competition)
Today, Blockbuster is a husk of its former self while Netflix thrives. And, Netflix can't rest on it's laurels because it is already attracting fierce competition.
Winner (again): Consumers.
Do you think this drastic change (which benefited consumers greatly) would have occurred if a) the government ran Blockbuster or b) Blockbuster was able to get regulations passed granting a monopoly to itself (think phone company) or otherwise limiting competition?