Sponsored by

A Blockbuster Investing Lesson By Spencer Jakab

Trade wars , actual wars , a housing slump and rate uncertainty ? Sounds like a recipe for stocks within 1% of all-time highs. U.S. benchmarks are set to open about flat following their recent rally. Oil prices, meanwhile, look set to recover from a three-day drubbing.

***

With bidding wars for AI companies and talent in the news almost every day, is the next trillion-dollar opportunity getting the cold shoulder?

Please be kind and rewind 25 years to when one dominant company missed a monster opportunity and another agreed to what's been called the worst deal in history . They show that fast-growing, asset-light businesses can "disrupt" existing ones but also risk getting disrupted themselves after attracting silly prices.

Before anyone could imagine it becoming the world's most valuable entertainment company , Netflix co-founders Reed Hastings and Marc Randolph were renting DVDs by mail. The brick-and-mortar video-rental business was dominated by Blockbuster. According to Hastings and Randolph, the two met that year with Blockbuster and offered to sell themselves to the chain for $50 million.

They were practically laughed out of the room . Netflix shareholders, now sitting on a company worth 10,000 times that spurned offer, are laughing all the way to the bank. Blockbuster filed for bankruptcy a decade later. You can stream a documentary about the world's last Blockbuster video store... it's on Netflix .

The same year, with internet pixie dust in its eyes, media giant Time Warner entered the largest merger in history with web portal AOL. From the Journal's coverage that day: "Time Warner has essentially admitted that its own costly efforts to move the company into the digital era have failed, forcing it to hitch a ride into the future with AOL."

Two years after the deal closed Time Warner admitted it had made a gigantic mistake, removing "AOL" from the company's name . Technology moved on and imagined synergies didn't work out.

Hindsight is 20/20, but some executives have vision while the supposed best and brightest lack it. In 1997 Amazon founder Jeff Bezos, who doesn't have an MBA, gave a presentation to a class at Harvard Business School about his company. They formed a group to discuss it, and this was what one told Bezos, according to Brad Stone, author of " The Everything Store ":

"You seem like a really nice guy, so don't take this the wrong way, but you really need to sell to Barnes & Noble and get out now."

Who knows what would have been if Netflix or Amazon had become units of large, hidebound competitors.

We do know why dominant companies fail to embrace the future until it's too late. Executives don't want to cannibalize existing, profitable businesses [https://www.christenseninstitute.org/theory/disruptive-innovation/#::text=Disruptive%20Innovation%20describes%20a%20process%20by%20which, ubiquitous%20from%20Wall%20Street%20to%20Silicon%20Valley.] they understand for ones they don't. By the time their businesses are losing customers, prices are more than full and the next iteration of the disruptive technology is about to make the original one look quaint.

Small investors aren't the only ones who suffer from FOMO.

Stocks I'm Watching

FedEx : When you absolutely, positively have to make your quarterly numbers, but a trade war erupts: The delivery company said it expects a $170 million headwind this quarter from a change in tariff rules for low-value packages . Shares fell more than 5% in premarket trading.

Tesla : The EV maker logged another month of steep sales declines in the European Union. Tesla's new-car registrations fell more than 40% in May , data from a European industry body showed.

QuantumScape : Shares in the startup surged by about one-third premarket after it announced a breakthrough in its process for making solid-state batteries.

General Mills : The maker of Cheerios and other cereals is due to post earnings early Wednesday. In March, the company cut its annual guidance amid a tough market for packaged foods.

BlackBerry : The cybersecurity company raised its annual sales guidance after posting better-than-expected quarterly results . Shares jumped 10% ahead of the open.

CONTENT FROM: FTI Consulting FTI Consulting - Experts with Impact

FTI Consulting is the leading global expert firm for organizations facing crisis and transformation. Many of the world's top international corporations, private equity and law firms trust us with their most important issues. FTI Consulting: Experts with Impact.

Read more

Markets at a Glance

Data refreshes every time you open this email.

Follow our live markets coverage , updated throughout the day.

One Big Chart

Bond Investors Stay Cool Despite Debate Over Government Borrowing

Tepid inflation, mixed economic data and signs that the Trump administration will limit longer-term debt sales are fueling optimism that this bond-market rally has legs .

What I'm Reading Young Americans are economizing: Goodbye fancy bar, hello pizza party at home. ( WSJ ) Mideast tensions have revived China's interest in the Power of Siberia 2 gas pipeline with Russia, stalled in part due to pricing disagreements. ( WSJ ) You love them, you want them, you can't live without them...and they're costing you a fortune in repairs, insurance and replacement parts. Why America's obsession with cars has turned dangerously codependent. ( WSJ ) Those cheaper, compounded versions of weight-loss drugs are mostly gone, but the market for them is still messy. ( Barron's ) Don't just do something, stand there. The most successful investors tend to trade very little, and the evidence for sitting on your hands as much as possible is compelling. ( Random Roger ) This Day in Markets History

On this day in 1974, Texas Instruments and three of its engineers received U.S. Patent No. 3,819,921 for their hand-held aluminum calculator. It was 1 3/4" thick and could add, subtract, multiply and divide. It sold for between $84.95 and $119.95.

Beyond the Newsroom

Buy Side from WSJ: How to find insurance coverage options for pets with pre-existing conditions.

About Me

I've been musing about finance for more than 30 years, including editing The Wall Street Journal's Heard on the Street column for a decade, writing two investing books and running a team of stock analysts at a global investment bank.

The Markets A.M. newsletter prepares you for the trading day ahead, with expert insight into the companies and industries set to move markets. Send your feedback to [markets.am@wsj.com], or reply to this email.

Enjoying this newsletter? Get more from WSJ and support our journalism by subscribing today with this special offer .

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 25, 2025 06:28 ET (10:28 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.