See this all the time, and want people to see a little deeper into it. It's easy to play Monday morning quarterback on missing out on acquisitions, but the side that people don't see is the heart of corporate and competitive strategy, "who are we?" "what game are we playing?", and "how do we win?". Blockbuster just never viewed their content as their core competency like Netflix does now. What they viewed as their greatest asset, by leaps and bounds, was their real estate. The owned some of the best real estate in your hometown, guaranteed. It was an expensive and difficult portfolio to assemble, but it provided them with a distinct competitive advantage over rivals that had inferior real estate. Blockbuster viewed itself as the neighborhood movie store; they were going to manage a huge database of movies and customize to local markets, and have the absolute best locations. You have to remember, at the time, we can all remember going to the neighborhood movie store on a Friday or Saturday night, or our mom sending us down the street on our bikes with a bunch of movies that were late. It was a part of the social fabric. They had little reason to think that it was going to change...until it did. Remember, they turned down the acquisition in 2000...the NASDAQ peaked in March 2000 and then the dot-com bubble burst. They could have got Netlfix for a song, and they probably should have, if for nothing but to squash competition to squeeze out the remaining profits from their current business model, but think about all the market turmoil at that time. Pets.com, Books-a-Million, InfoSpace, Boo.com. HUGE market cap companies were crashing in 2000, you could see why someone with a tried-and-true brick and mortar business model would want to hunker down and play it safe while this turmoil played itself out. Blockbuster had no incentive to completely alter their business model because some fledgling startup offered to manage their online presence (that's what Netflix was offering). The Blockbuster CEO wasn't an idiot, subscriptions would completely destroy something like $200MM they were making a year on late fees. He would've got shit-canned if he tried to kill the cash cow. Granted, four or five years later, he saw the light (saw Netflix as a threat) and convinced the board to change the game, but he got back-stabbed by one of his executives and pressured by Carl Icahn, iirc, and the board made him reverse the changes. All in all, what the story really shows is how traditional SWOT analysis is complete shit, a strength can become a weakness overnight, an opportunity can become a threat overnight, being a CEO, i.e. anticipating the future, is really damn hard.