Blockbuster, Netflix, Urban Outfitters & Lenin

Blockbuster took a second-quarter loss that booked in to be less than expected. Last April it looked like the company might go out of business, in fact. They did some cost-cutting--fewer minimum wage kids working there, less to choose from on the shelves, fewer promotionals--and came out of it with an 18% loss of sales. Revenue dropped by 22%.

Blockbuster's main rival right now is Netflix. Nexflix has a facility in Salem that you can't easily find; they aren't in the phone book and their building had no identifiers the last time I went looking for it.

Netflix has several advantages over Blockbuster. They can offer customers more choices, a customer can order from home and keep ordering, they have significantly lower operating and labor costs--and they get help from the Post Office. The Netflix mailers do not conform to the standard mailing packages sizes so the Post Office has special bins for Netflix and pulls workers from other jobs when the company ships its videos. Reportedly the company gets away with this at no additional cost. We pay for it as Post Office customers. Remember that next time you're standing in line at a Salem Post Office.

Urban Outfitters also took a hit in sales and their profits dropped 14% in the company's second quarter. What makes Urban Outfitters' situation different from Blockbuster is that the company has some control over some of its competition--they also own Anthropologie and Free People--and they're doing a strong push to monitor consumers and shopping patterns with invasive high tech. Their database has information on over one million Anthropologie customers alone. The company has only 300 Urban Outfitters stores nationwide but these sell a variety of items and this gives banks and investors added faith in the company. The company is opening more stores while taking hits on profits. Prices at Urban Outfitters are actually dropping, which probably reflects the kind of deflation we wrote about recently and a marketing strategy as well. Blockbuster could get thrown under the bus by banks and investors, but Urban Outfitters is more likely to get the financing it needs to carry on for awhile, even with double-digit losses.

Companies compete with one another and race to cut labor and production costs, increase production and increase their profits and rates of making profits. Companies that lose in the competitive markets get swallowed up by larger companies or go out of business entirely. The workers and small businesses affected by this process are an afterthought, at best, to the banks and investors, who watch nervously for signs that profits and rates of profits are declining or labor costs and the costs of buying and maintaining labor and labor power are increasing. This is how monopolies form. Rival monopolies and their constant push for new means of production, new markets and advantages over one another cause the political instability and most of the wars workers end up fighting one another in. Economic competition is politicized and becomes very much its opposite over time because built into the system are processes which lead to economic crises and its destabilization.

Lenin got the point. He wrote:

Monopolist capitalist associations, cartels, syndicates and trusts first divided the home market among themselves and obtained more or less complete possession of the industry of their own country. But under capitalism the home market is inevitably bound up with the foreign market. Capitalism long ago created a world market. As the export of capital increased, and as the foreign and colonial connections and “spheres of influence” of the big monopolist associations expanded in all ways, things “naturally” gravitated towards an international agreement among these associations, and towards the formation of international cartels.

This is a new stage of world concentration of capital and production, incomparably higher than the preceding stages.

...The capitalists divide the world, not out of any particular malice, but because the degree of concentration which has been reached forces them to adopt this method in order to obtain profits. And they divide it “in proportion to capital”, “in proportion to strength”, because there cannot be any other method of division under commodity production and capitalism. But strength varies with the degree of economic and political development. In order to understand what is taking place, it is necessary to know what questions are settled by the changes in strength. The question as to whether these changes are “purely” economic or non-economic (e.g., military) is a secondary one, which cannot in the least affect fundamental views on the latest epoch of capitalism. To substitute the question of the form of the struggle and agreements (today peaceful, tomorrow warlike, the next day warlike again) for the question of the substance of the struggle and agreements between capitalist associations is to sink to the role of a sophist.

The epoch of the latest stage of capitalism shows us that certain relations between capitalist associations grow up, based on the economic division of the world; while parallel to and in connection with it, certain relations grow up between political alliances, between states, on the basis of the territorial division of the world, of the struggle for colonies, of the “struggle for spheres of influence”.

For the entire text by Lenin, go here.