Mr. Horne's Book of Secrets

The Blockbuster Video Mentality

I just got home from a vacation.

And, being a good citizen of the internet, I opted not to tell anyone about my trip or that I would be out of town. So if I have been acting at all aloof these past 3 weeks, then allow me to apologize.

Because I was not on any ordinary vacation. I was on a cruise.

Where the Internet hasn’t been Invented Yet

Cruises are, in many ways, the ideal mode of vacationing. But they come with one significant drawback: limited internet connectivity.

The cruise line I was using for this vacation is particularly bad about this. They sell internet “packages” where you can buy so many minutes (not megabytes, but minutes) of internet time. Since I have a platinum loyalty card with this cruise line, I get a complimentary internet package as soon as I board that could cover most (but not all) of my internet needs. And every time I used the internet, it was always a race to get as much done in as little time as possible.

These uncivilized conditions caused many passengers to take advantage of whatever free wifi they could find in the port cities visited by the ship.

And so it was that I found myself hovering around a wifi hotspot in the city of Akureyri, Iceland, answering emails, surfing social media, and checking the price of various assets and securities.

And while sitting there, I made the acquaintance of an older gentleman investor, who chiefly put his money in the bond market and index funds, and who had never heard of cryptocurrencies. We talked for a while before I pointed out that we were outnumbered. The free hotspot we were using was surrounded by more cruise staff than cruise passengers. And I wondered aloud if these ship employees are given insufficient minutes per day on the ship’s network.

“Naw, the ship forces them to buy their minutes,” was the man’s reply.

And this was shocking to me, knowing what kinds of lives these people lived. Most of the ship’s crew are from the the Philippines, India, Thailand, and other exotic locales. They leave their family and friends for 9 months at a time to work on these cruise ships, and often the only way they can communicate with their loved ones is through the internet. And these are some of the hardest working people you will ever meet. They get no days off. They work in all kinds of conditions, on a floating hotel that does not hold still, even when they are performing high-precision work. And yet the cruise line takes money out of their paycheck if they try to call home.

That is inexcusable.

Naturally, I did not take this news well. I reacted with revulsion, stating that the way these ships sell internet access was irresponsible, and that both passengers and crew were getting a raw deal here.

To which the elderly investor replied, “Well, let me tell you something: that ship there is more than just a ship. It is a business. And in order to succeed as a business, you have to squeeze every last cent out of your customers.”

“No,” I objected. “I cannot subscribe to that philosophy. My outlook is more in line with Steve Jobs.”

And when the gentleman asked, “Who’s that?” I knew our conversation was over.

The Blockbuster Video Mentality

The differences discovered by this conversation were, I think, more generational than anything else. My formative years took place during what may be the most revelatory era in human history. Business and society have evolved so quickly of late, discarding what was previously held as market gospel and revealing deeper truths. And I notice that a lot of people from this gentleman’s generation are still locked into what I call “The Blockbuster Video Mentality.”

It hardly needs to be repeated here, but for completeness sake, let us briefly review the real world events surrounding this idea:

Once upon a time, there was a mighty titan in the marketplace called Blockbuster Video, who held a near-monopoly on home entertainment. Having cornered that market, the great titan was determined to squeeze every last margin of profit from his customers. He was not afraid to charge punitive late fees and set cruel return schedules, with no sympathy for the needs of the consumer.

Consequently, everyone hated him. But they still rented videos at his counter, for they had little other choice in the matter. All other video rental companies of that era followed Blockbuster’s example, for Blockbuster raked in monstrous profits through his gouging of the common man.

Nobody was surprised when he was killed, though many were surprised as just how quickly his corpse hit the floor. It all happened in an instant, at the exact moment that a better alternative appeared. Redbox and iTunes first stabbed him through the heart, and then Netflix, Hulu, and other streaming services tore him to pieces until there was nothing left. When the dust settled, there was no trace of him left in the world. Blockbuster Video had not just been destroyed; it had been erased.

But, even now, the Blockbuster Video Mentality is not dead. It continues to deceive companies into believing that it will bring them riches and longevity, when in actuality it brings a much harsher reward:

Corporate Suicide

Squeezing your customers is the perfect way to drive your business into the ground. It only works until any viable alternative comes along. And this is why Blockbuster Video crashed so quickly and so hard.

Anyone who thinks this is a good business strategy should not be running a business. Yet we still see it implemented by those confident enough to think they cannot be deposed (you may remember my last post on this subject).

And this is why I cannot countenance such an approach to business, because I know that no amount of short-term profiteering can compare with real, long-lasting success. The idea that the most successful businesses are the ones that most exploit human beings has been disproven time and time again in recent years.

The Example of Steve Jobs

It can be debated whether or not Apple Computers subscribes to the Blockbuster Video Mentality. The in-app purchases that characterize a lot of Apple-run software certainly fits that bill. And Apple is no stranger to gouging customers with steep markups on their hardware. And I don’t know how much blame for that lies at the feet of Mr. Jobs.

However, I do know that he is the man who gave us the 99¢ song. He is the man who dreamed up the effortless music purchase. And when the dying record industry knocked on his door and demanded that he make it impossible for customers to copy music files, he sat them down, looked them in the eye, and said, “That won’t work.”

Because Steve Jobs understood that you can’t treat your customers like cattle and then expect them to honor your business model. He realized that removing barriers and loosening the corporate vicegrip on the customer experience would only increase the profit yields. And from that philosophy, he created the most valuable company on Earth—at one time even more valuable than Google.

Applying these Lessons to the Cruise Industry

The Blockbuster Video Mentality is a kiss of death, regardless of the industry it occurs in. That death may be slow, or it may be swift, but it can only be stopped by a severe course correction. We’ve seen this in the record industry, the photography industry, the movie industry, and, currently, the banking industry. The travel industry will face its own reckoning, sooner or later.

A lot of hotels have already caught on to this, providing wifi without limitations to all of their customers. Perhaps it is too much to hope that the cruise industry do the same, but they could begin charging by the amount of data used, rather than the amount of time that passes from login to logout. Charging by the megabyte, rather than the minute, is a standard in the communications industry, and I can almost guarantee that whichever satellite company the ships get their internet from charges this way.

And I do not believe it is too much to ask that the ships provide their crew with the same amount of complimentary megabytes that are given to the platinum-class passengers. Remember, mistreating people only gives you the illusion of profit, when in actuality you are losing money by ostracizing your customers and employees.

But they don’t have to take my word for it. If the industry tries it, even on a temporary, experimental basis, they can see the results for themselves.

No one has to meet the same fate as Blockbuster Video, after all.