Sunday, August 9, 2015

"Creative destruction".............................


...............is an important, and necessary, feature of capitalism.  Interfere with that process, and you get "statism" and/or crony capitalism, which are very different systems than capitalism.  Here is one case where creative destruction was forecast long before it actually happened, and no government action was taken to stop it.

















We take a special interest in this chart.  In 1998 we had the opportunity to do a build-to-suit deal with a Blockbuster franchisee.  Everything about the deal was favorable to us, with the exception that the franchisee/tenant would only agree to a seven year lease.  We wanted a ten year lease, which would better enable us to recoup our investment.  Neither party would budge on that issue, so the build-to-suit opportunity never materialized.  It was pretty clear in 1998 that the video rental business would be threatened by technology that would allow for movies to be downloaded onto computers.  We knew something would happen.  We didn't know it would be Netflix.   Netflix was created in 1997, but didn't actually deliver movies until two years later. Twenty years ago, Blockbuster and their competitors leased/owned a great deal of retail real estate.  Their demise jacked up the vacancy rate and hurt our industry - just not us personally.

source of chart, and one version of the story, here.

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