Here’s a good one for you – It’s Carl Icahn’s fault that Blockbuster Inc. is in the sad state it is in today. At least that’s the view of disgruntled junior bondholder Lyme Regis Partners, who claim in a lawsuit that Icahn set the video retail chain to fail so that he could take over the company (as reported on Dow Jones Daily Bankruptcy Review).
The lawsuit goes on to allege that because of his insider status, Icahn had a much better view of how bad things were for Blockbuster and there that allowed allowed him to position himself ahead of the other investors because he knew before everyone else that the company was much closer to bankruptcy.
Hmmmm… Where was Lyme Regis when the other video-chain chains were going out of business? Where was it when all of the smaller Mom & Pop video chains went out of business. Did it not notice a fundamental shift in the way people consumed video? Like Netflix, first with the mailing the DVD model to your home and then the streaming video model? Or Apple’s iTunes store doing something similar?
No, the problem with Blockbuster was very similar to the one that crippled Eastman Kodak. Here, Kodak was the king of film for many, many years, challenged every once an awhile by another company like Fuji. Blockbuster wa the king of home video, challenged every once an awhile by companies like Hollywood Video. But when technology changed and digital became so popular, Kodak was still peddling film. It should have been out in front of the seismic digital change instead of being forced to play catch up for years and years. Same thing for Blockbuster. It was handcuffed by its brick and mortar strategy without a vision of how to change with the times.
I’m sure there are a lot of reasons why people are critical of, and don’t like, Carl Icahn. But it’s not because he felled Blockbuster.