Wed. Sep 18th, 2019

The Balfour Institute of Esoteric Culture

The Internet is a dark and terrible place

Today’s Failure is Enron and their Blockbuster deal

2 min read

Endless Accounting fraud more like.

That’s right, it’s an oldie but Goldie, Enron, granddaddy of corporate failure and seeing as Blockbuster now belongs to the pages of pointless history, I’d call it a nice and comprehensible failure.

Enron’s idea was to capitalize on the dot-com bubble by building massive fiberoptic backbones, hoping to rent it out for various IT uses, hoping to essentially “corner” the market for bandwidth.

“But that’s not how it works Philip?”, yes, I am well aware that isn’t how any of this total nonsense work, but Enron was Enron, they thought everything could be turned into a commodity, just like they’d done with gas and electricity.

As part of this massive gamble, Enron made a deal with Blockbuster for something very novel, a streaming service, in 2000, nineteen years ago, Blockbuster would provide their content through their contacts with the movie industry and Enron would provide the technological knowhow and bandwidth to deliver the content.

Fairly straightforward right? No.

Turns out that Blockbuster had been pissing off most of Hollywood for years, forcing them to give out increasingly large concessions, by way of their dominant market position when it came to video rentals, so the content they provided to this “Video-On-Demand” service was mostly softcore erotica and Z-list movies.

Combine that with the fact that even today, there are many areas in the US with absolutely rotten internet, you can imagine how small the customer base was.

The answer is to small, the deal collapsed, and Enron hid away the massive loses in yet another accounting boondoggle, that inevitably killed of the company later.

As part of the preparatory work on this deal and the attempt to sell bandwidth as a commodity, Enron build a massive datacenter in Las Vegas, costing millions, it was later sold for: 930000 US$.

The lesson learned: Nothing, Venture capitalists are fucking morons frankly.

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