Blockbuster (movie rental store)
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| Blockbuster Inc. | |
 |
|
| Type | NYSE: BBI |
|---|---|
| Founded | 1985 |
| Headquarters | Dallas, Texas |
| Key people | John Antioco, CEO, Chairperson |
| Industry | Retailer |
| Revenue | $5.23 website = [29] |
Blockbuster Inc. (NYSE: BBI) is the largest chain of video tape, video game and DVD rental shops in the world. It is headquartered at Renaissance Tower in downtown Dallas, Texas, and has locations in over thirty countries, including the United States, Canada, Mexico, Central America countries, Argentina, Uruguay, Ireland, Puerto Rico, UK , Australia,New Zealand , Israel, Brazil, Chile, Taiwan, Italy, Colombia.
Contents |
[edit] History
Blockbuster Entertainment Company began as Blockbuster Video in Dallas, Texas when it opened its first store on October 19, 1985. The founder of the company was a 29-year-old named David P. Cook (See article in CNN Money.com dated 7/1/03). Cook grew the business and brought it public before handing the reins to CEO, Wayne Huizenga who quickly grew it into a multi-billion dollar corporation. It was sold to Viacom in 1994, at a price of $8.4 billion. During the 1990s Blockbuster bought out their major UK rival Ritz Video and changed the name of all the stores to their own, which made them the number-one video rental store in the country by a wide margin. In 1996, the Blockbuster Entertainment Corporation as it was then known, was renamed Blockbuster, Inc. and the retail stores, Blockbuster. Most older stores have not changed.[1] In 2000, Blockbuster entered into a 20-year exclusive agreement with Enron to offer streaming video through Enron's broadband network (the "Enron Intelligent Network"). The next year, the deal was canceled, and in December 2001, Enron filed for bankruptcy protection.
Blockbuster has lost significant amounts of money in recent years: $1.6 billion in 2002, almost $1.0 billion in 2003, and $1.2 billion in 2004.
In December 2004, Blockbuster announced it wanted to do a hostile takeover of Hollywood Video, its major U.S. competitor.[30]. In response, Hollywood Video agreed to a buyout on Monday, January 10, 2005 by its smaller competitor, the Dothan, Alabama-based Movie Gallery. (It is unclear if the proposed takeover by Blockbuster would have received anti-trust approval from the Department of Justice).
As of February 2006, the company had a market value of under $500 million.
In March 2006, the company announced the closure of all its stores in Spain. The reason that Blockbuster gave was that they had lost about 5,5 million euros in 2004, 65 percent more than the previous year - allegedly due to movie piracy. [2][3]
[edit] Retail operations
At the end of 2004, Blockbuster's annual report put the number of U.S. stores at 5,803 (4,708 company-operated and 1,095 franchised). International stores (operating under Blockbuster and other brands) totalled 3,291, including 426 in Canada, 897 in Britain, and 408 in Australia. It has been claimed that there are more than 43 million U.S. households with Blockbuster memberships.
The company has a large arm Irish subsidiary, Xtravision, which does not operate under the Blockbuster brand name. Blockbuster no longer owns Rhino Video Games, after having sold it to Gamestop.
Blockbuster opened 24 outlets in Hong Kong, but announced in January 2004 that it would shut down all of its outlets over an 18 month period.[4] An alleged factor in this closing was the widespread sale of pirated tapes and DVDs by illegal street vendors. For the same reasons, Blockbuster also sold its assets in Brazil to Lojas Americanas.[5]
[edit] Business model
The standard business model for video rental stores was that they would pay a large flat fee per video, approximately US$65, and have unlimited rentals for the lifetime of the cassette itself. It was Sumner Redstone, whose Viacom conglomerate then owned Blockbuster, who personally pioneered a new revenue-sharing arrangement for video, in the mid-1990s. Blockbuster obtained videos for little cost and kept 60 percent rental fee, paying the other 40 percent to the studio, and reporting rental information through Rentrak. What Blockbuster got out of the deal, besides a lower initial price, was that movies were not available for sale during an initial release period, at least at an affordable price point - customers either had to rent, wait, or buy the film on tape at the much higher MSRP price targeted at other rental chains and film enthusiasts, at that time then between $70-$100 before the end of the initial release period.
In 1998, Blockbuster refused to use the same model for DVDs, which was just starting as an alternative format. The studios then decided to price DVDs low enough so that it could be sold to the public in direct competition with video rentals, and to provide no rental-only release period. As a result, the amount of DVD sales increased while rentals of the same titles did not. By 2003, the studios were taking in three times as much money from DVDs sales as they were from VHS videos.[citation needed]
[edit] Special Programs and Offers
[edit] Guaranteed in Stock
Blockbuster guarantees the avalibility of select titles. These titles are selected before release, determined by volume of stock and price of stock. They become guaranteed the second week of their release and typically stay guaranteed for two months. When the title is out of stock the customer is given a coupon, this coupon is good only for the guaranteed title and expires in 30 days.
The practice was briefly dropped in 2004 when Blockbuster first introduced the "End of Late Fees" promotion. During this time there was an ongoing problem with unreturned titles. Blockbuster was able to secure deals with several major studios to secure more rental stock and reinstate the practice as of early 2006. It is currently still offered. As is the case with all Blockbuster promotions and policies, franchise stores are not required to participate, and due to the added cost many do not.
[edit] Blockbuster Rewards
Blockbuster Rewards is an optional, paid membership program that began in 1998. For a yearly fee (usually $9.95 tax-free), members can obtain free rentals through their Rewards membership by the following means:
1. Once a month, customers receive a coupon for a non-New Release movie.
2. For every five paid rentals within one calendar month, the customer receives one New Release or video game rental free. When they rent five, they get one rental free (which may include New Release movies or games). Only two free rentals can be accumulated each calendar month using the rent five, get one method.
3.On Monday through Wednesday Blockbuster Rewards customers can receive a free non-new release movie rental for each paid rental.
The Rewards program is designed to provide a discount to high-volume customers, mostly those who watch the latest releases. Because the cost is relatively low (about the cost of two rentals) and its effective time is so long (one year), it also caters to those with sporadic rental patterns. Moreover, unlike the Movie Pass program or an online program, no credit card is required to purchase Rewards, so it can serve as a volume discount to those without credit cards.
[edit] Movie Pass and Game Pass
Blockbuster also started a Movie Pass program, which operates similarly to NetFlix or its own mail-in rental service. Blockbuster members pay a flat fee to rent as many movies as the member would like. The in-store Movie Pass has the advantages of both speed and volume. A customer may swap movies twice a day or more, if he/she so desires. Moreover, the Movie Pass allows a customer to obtain a movie on-demand, rather than waiting the 10-20 days for an online rental. On the other hand, the selection is limited compared to mail-in programs, and the in-store Movie Pass is typically more expensive. When Extended Viewing Fees were still charged, the Movie Pass program enabled a customer to keep their movies for whatever period they wished without having to pay Extended Viewing Fees.
Blockbuster also offers a Game Pass, which works like the newer movie pass, except that it allows customers to swap games instead of movies.
[edit] GameRush Stores
In Summer 2003, Blockbuster started converting select stores in select regions to GameRush stores. These stores sell and buy consumers DVDs, games, gaming systems, and accessories. It is offered as a direct competition to stores such as EB Games, GameStop and Game Crazy. Blockbuster used their location status to get instant coverage; it also promotes these stores by hosting video game tournaments, special trade-in offers, and a more "hip" look to the selection and staff. However when Blockbuster introduced "The End of Late Fees" GameRush was put on the chopping block. As of April 2007, GameRush stores are being reduced back being just a games section.
[edit] Elimination of late fees
On January 1, 2005 Blockbuster introduced their "Life after Late Fees" program.[6][7] Instead of late fees, which Blockbuster called Extended Viewing Fees (see infra), Blockbuster allows a seven day window after the due date, wherein the item may be returned without charge. After this point, Blockbuster automatically converts the rental to a sale and charges the customer the sale price (initially the retail price, it changes to the previously viewed price after 45 days in most cases) of the unreturned item. As of August 22, 2006, Blockbuster discontinued the rental-to-sale policy that had customers pay for the price of the movie minus the rental fee. Now, the rental fee will not be deducted from the sale. Customers may then return the item within 30 days after the automatic sale date to have this charge refunded, less a "restocking fee" of $1.25. The initial due date of the rental item and the automatic sale date are both printed on the receipt beneath the title of the rental item.
The "Life after Late Fees" policy, as stated above, applies to corporate-owned stores, and some elements of the policy may differ among franchised stores. Exact terms and conditions can be found on Blockbuster's website here.
On February 18, 2005 the Attorney General of New Jersey filed suit against Blockbuster, alleging that it had failed to clearly disclose the terms of the new policy, and that some franchised stores were not participating in the program, had shorter grace periods, or charged higher 'restocking' fees.[8] Other states began looking into the program as well. On March 29 Blockbuster signed an "Assurance of Voluntary Compliance" with 46 states and the District of Columbia (not including New Jersey), in which it agreed to more clearly inform customers of the terms and limitations of the program.[9] A refund program was set up for those affected by the purchase charges or restocking fees, and rental coupons offered to compensate for Extended Viewing Fees paid in non-participating stores prior to the agreement. Blockbuster also paid $630,000 to the states involved to cover the costs of the investigation.
In 2002, Blockbuster settled a prior, unrelated suit that claimed that the company's late fees were unfair. Under the old Blockbuster policy, a customer was charged the full rental price for every rental period a movie was late. For example, if a 2-day movie rental cost $5, and the rental was returned 7 days late, the customer would be charged $20 in late fees. The settlement included coupons distributed to customers who had paid late fees under the old policy. Blockbuster changed their policy and began charging "Extended Viewing Fees," where the customer simply paid as if he had re-rented the movie.[10]
[edit] Quantity and selection of titles
Blockbuster (like most other rental stores) tends to stock more copies of new movies than older releases, in order to capitalize on heavy consumer demand for new release titles. Titles that are more than one year past their initial release date are stored as "Blockbuster Favorite" (non-new release) titles. DVD non-new releases are not officially branded as Blockbuster Favorites, but are often referred in that manner anyway. Typically only 1-4 rental copies are retained past the first year of release. The large volume of new release copies are typically sold after the initial renting rush. These copies are usually sold "previously viewed" for around $10-15, sometimes as low as $5. Most Blockbuster locations also accept trade-ins of used DVDs, which are sold alongside the existing stock of previously rented movies in order to create a more robust selection of titles for sale.
Increasingly, Blockbuster, movie companies, and other rental stores, are adopting online or other methodologies to deliver movie content to their customers.[11] Those customers who are interested in a large catalog of older movies are best suited to online rental programs, such as Blockbuster Online (see infra) or Netflix, both of which offer a larger variety than any brick-and-mortar video store can provide.
[edit] Online operations
[edit] United States
In August 2004, Blockbuster introduced an online DVD rental service in the U.S. to compete with the established market leader, Netflix.[12] The initial price of the standard three-disc plan was $19.95, which was below the Netflix price (which had increased from $19.95 to $21.99 in June).[13]
In October, Netflix reduced its own 3-disc price to $17.99; Blockbuster responded by reducing its price to $17.49.[14] Blockbuster made a further reduction to $14.99 in December, and apparently guaranteed this price to existing customers until January 2006.[15] In August 2005, Blockbuster raised their prices for new customers to match the Netflix level of USD$17.99.[16] The above prices are for the standard three-disc plan; other plans vary from $5.99 for one disc (limit 2 per month), $7.99 for one disc (limit 3 per month),$9.99 for one disc (unlimited), and $14.99 for 2 discs (unlimited).
Blockbuster currently offers bonus coupons to all of its online customers. These coupons are used in-store. Customers on any plan receive one coupon per month to rent a free DVD or game from a brick-and-mortar location. Customers who signed up for the three-disc plan prior to the introduction of Total Access received four coupons per month (one per week) which could be used for movie rentals in store. An option no longer available to new customers is the three disc plan that offered only two coupons per month. These could be used for either movie or video game rentals. Older members of the three disc plan had the option to continue this plan, or switch to the newer four coupon plan. With the new option to exchange the online mailers for free in-store rentals, the coupons no longer became necessary. However, older members still receive two coupons per month good for either game or movie rentals for the same price that members with one coupon pay. Online customer service will not allow older members to revert to this plan after responding to Blockbuster advertising intended to drive them to a new plan. When a customer contacts the online customer service to report a problem that caused a delay, the response usually includes an additional in-store bonus coupon, which is good for 30 days.
Blockbuster also offers a special promotional discount to new customers or customers who canceled their online program before the introduction of Total Access. The first two weeks of online service are free for a three-disc plan. There is also an elusive promotional discount for the first month of online service for free for a three-disc plan that is available on several online coupon websites. After the promotional period, customers have the option to retain, cancel, or modify their subscription packages.
Blockbuster's U.S. online operation started with around 10 warehouses; further expansions have brought that number to 35 plus 1400+ stores in the Blockbuster Online network. [17][18][19] The company had 1.5 million subscribers at the end of the third quarter of 2006 (as compared to 5.6 million for Netflix).[20] Blockbuster's move to follow the business pattern with its online rentals as was established by Netflix prompted Netflix to sue Blockbuster for infringement of patent. Blockbuster counter sued Netflix with a counterclaim alleging deceptive practices with its patent which it alleges was designed to maintain an illegal monopoly.
[edit] Blockbuster Online Total Access
In November 2006, Blockbuster launched a revamped Blockbuster Online known as "Blockbuster Online Total Access". Total Access is an attempt to regain customers who left for competitor stores and services, namely Netflix.
While customers will still be able to send their online rentals back through the mail, Total Access gives them the option of returning the movies to their local participating Blockbuster store. In exchange, every online rental returned to the store can be redeemed for a free in-store rental within that same visit. Once an employee scans the online rental for the exchange, the item is automatically checked in, prompting for the next movies to be sent, though it may still show up on the customer's online queue until it reaches distribution. Many complaints recently on review boards have been showing a significant delay taking place with this procedure recently though. Because Total Access and the stores are technically separate businesses, if a customer rents a movie in-store and it is also in their queue, it must be removed by the customer via their online account to avoid receiving the same movie by mail. Some stores also feature an in-store laptop in which customers can sign up for the Total Access program, manage their account or queue, and even cancel their Netflix account.
On December 5, 2006, Blockbuster introduced a deal under which offers Netflix members a free movie rental when they exchange the tear-off address flaps of their Netflix rental envelopes. Members could receive on-the-spot free rentals from Blockbuster for every flap they bring in to their local Blockbuster. The deal expired December 21.
Blockbuster Total Access had 2.2 Million customers at the end of 2006, exceeding their original goal of 2 Million, according to the offical website.
On January 5, 2007, Southern Stores Inc, one of Blockbuster's largest franchise operators in the United States, filed a lawsuit in federal court alleging that, by introducing Blockbuster Online and Blockbuster Total Access, the rental chain has undercut the group's franchise agreement. [21]
[edit] Blockbuster Online Total Access For Game Rentals
On December 19, 2006, Blockbuster announced that all its total access customers will be able to redeem their monthly online coupon for either a free movie or a free game rental. However online DVD rentals may be exchanged for in-store movies only.[22] [23]
[edit] Blockbuster By Mail
On March 6, 2007 Blockbuster started sending out surveys to current Total Access Members asking how they would feel about a possible rate increase. This increase would be coupled with the introduction of Blockbuster By Mail, a Netflix clone with no in store exchange benefits. The current pricing structure would be assigned to Blockbuster By Mail, while Total Access members would see a $4 to $5 increase in their monthly fee.Blockbuster By Mail would be mainly for people who do not have a Blockbuster store close to them.
This survey coupled with the announcement that they were looking at "premium pricing" for Total Access suggests the rate increase and Blockbuster By Mail will be happening.
On April 7, 2007 Blockbuster sent follow-up surveys to Total Access members asking how they felt about a limit of six monthly in-store exchanges, plus the printable e-coupon, with each additional in-store exchange costing $0.49. Many think this suggests that they are looking at alternates to raising their fee structure.
[edit] United Kingdom
In the UK, Blockbuster has been providing a version of online rentals since October 2002 with its "Pay Per Rent" service.[24][25] This is more like a postal version of store rentals than the traditional online DVD rental subscription model, with per-rental prices of £3.50-£4.50, with a rental period of 5 nights (usually Monday-to-Friday, not including postal delivery times), and late fees (£0.70-0.90 per disc).[26]
In May 2004, Blockbuster also introduced a conventional online subscription service.[27][28] The unlimited 3-disc plan is £14.99/month.
[edit] NC-17 and unrated films
Claiming to serve a family audience, Blockbuster has always banned pornography, though carrying R-rated and unrated films, including a large number of "soft porn" titles (including Red Shoe Diaries which was distributed exclusively by Blockbuster in a now expired agreement with Showtime). Blockbuster requires employees to check ID and does not allow rental of titles with a rating over R to children under 17 unless their parents have specifically allowed it through a family account.
On September 27, 1990, the MPAA introduced the NC-17 rating in order to distinguish nonpornographic adult material from pornographic 'X-rated' materials. Subsequently, under pressure from the Christian organization the American Family Association, headed by Rev. Donald Wildmon, Blockbuster at that time decided not to stock NC-17 titles and also to ban certain "unrated" titles from its store shelves, regardless of whether or not these titles constituted "pornography". Originally, the AFA also convinced Blockbuster to ban certain contentious films such as The Last Temptation of Christ, although Blockbuster's online service and many of its stores currently carry that and other controversial films,[citation needed] as well as older NC-17-rated films such as Henry and June and Showgirls.
Critics of the chain, including Naomi Klein in her anti-globalization book No Logo (1999), allege that Blockbuster is involved in "censorship," because it not only bans certain titles, but has allegedly edited videos for release beyond the standard retail cut, or allegedly used its significant market share to influence studios to do so. Blockbuster's critics claim this alleged editing to secure more "family-friendly" ratings is a necessity for studios if they want their products to reach a wider video market.
Some award-winning movies such as Darren Aronofsky's Requiem for a Dream (2000), Michael Haneke's The Piano Teacher (2000) and Pedro Almodovar's Bad Education (2004) have been subject to such editing[citation needed], and were at one time unavailable for rental in their original form in most Blockbuster locations. Since being spun off from Viacom in 1999, Blockbuster's policies toward these films have become relaxed and these films are now widely available in their original versions.
For highly commercial films such as Anchorman or the American Pie series, Blockbuster will often carry the "unrated" DVD release instead of or in addition to the theatrical PG-13 or R-rated cut. In this case, the "unrated" version has often been specifically designed to appeal to the larger older teen market available through Blockbuster stores, advertising enhanced sexual or other content that supposedly would have secured it an NC-17, had this version ever been submitted to the MPAA for a rating. However, in reality, these "unrated cuts" simply include a few extra scenes that were not reviewed by the MPAA. It does not guarantee racier content.
In addition, Blockbuster also uses a "YRV" or "Youth Restricted Viewing" rating system to distinguish these racier, unrated DVDs. Any movie marked as YRV (usually on the same sticker with the barcode) is not recommended for or rented to any renter under the age of 17. YRV does not necessarily mean NC-17 rated content. It means this film is not rated by the MPAA; however, it is not suitable for children.
Blockbuster received criticism from filmmakers for these practices,[citation needed] which allegedly discriminated against films of greater artistic merit. Some also saw the policy as flaunting the chain's claim to be "family friendly."
Blockbuster policy prohibits ESRB Adults Only-rated video games. Recently Blockbuster followed many other retail stores and pulled Grand Theft Auto: San Andreas from store shelves after the game's rating was increased from Mature to Adults Only. Later, Blockbuster, again like its retail counterparts, began carrying a modified version of the game, from which "pornographic elements" had been removed.
In Canada, the YRV stickers carry an age limit of 18 or older. The policy of not carrying US "unrated" and director's cut versions have been relaxed in recent years with the establishment of the Canadian Home Video Rating System in 1995. It is not uncommon for Blockbuster Canada to carry American unrated versions of softcore films as well. Different provinces have differing community standards and rating systems which are required to be followed by law. As a result prior to 1995, the Blockbuster Canada simply followed the American policies in order to prevent confusion and have one uniform policy for all stores.
[edit] Marketing
[edit] Advertising campaigns
One of Blockbuster's most well known advertising campaigns was launched during the 2002 Super Bowl. It starred the voices of Jim Belushi and James Woods, as a rabbit and a guinea pig in a pet shop, located across the road from a Blockbuster store. The first campaign ended in 2003. The Carl and Ray campaign started again in 2007 starting with a commerical in the first quarter of Super Bowl XLI.
[edit] Franchising
In Australia, the company pursued a franchising model whereby its corporate stores, which peaked at 133 in 1998, were converted into franchises. The company also disbanded its chain of Game Rush video game stores, presumably as a part of the U.S. headquarter's strategy to focus on core rental business. Metropolitan Victoria (Melbourne) was the last remaining significant concentration of corporate stores.
In February 2007, Blockbuster announced plans to sell its Australian subsidiary and franchising rights to Video Ezy, subject to approval from the Australian Competition and Consumer Commission. Blockbuster's Australian operations encompassed 29 company-owned stores and 341 franchises, which Video Ezy would continue to operate using the Blockbuster brand.[29]
[edit] Slogans
- "Wow! What a difference!" (Australia, Canada, Puerto Rico, UK and U.S.)
- "Make it a Blockbuster Night." (All Countries, 2001-2003 (also in the U.S. during the mid-1990s))
- "Make every night a Blockbuster Night." (All Countries, Present)
- "Let the good times roll!"
- "Go home happy." (U.S., 1997; and Australia, 2004)
- "One word...one world" (related to combining Blockbuster Video & Music, 1996)
- "Bringing entertainment home." (U.S., UK, and Canada, 1999)
- "The end of late fees. The start of more."
- "Feel The Rush" (Note: Only applies to special "Game Rush" stores)
- "Renting is Better Than Ever."
- "Feel the Free." (used in Canada for the Blockbuster REWARDS)
- "More from Blockbuster." (used in U.S, Canada and Australia)
- "Don't rely on anyone else to entertain you!" (UK, 2005)
- "More movies, more choice, more value." (UK, 2005, Australia, 2006/2007)
- "Join Our Cast & Crew... From Leading Roles To Starring Roles." (help wanted ads in Canada, 2006)
- "Bring The Good Times Home" (U.S., 1992)
- "Life after Late Fees"
- "It's your time, take it"
[edit] Competitors
- Movie Gallery/Hollywood Video (stores only)
- Netflix
- Video Ezy (Australia, New Zealand & South East Asia)
- Network Video (Australia)
- Rogers Video (Canada)
[edit] References
[edit] External links
- Blockbuster Video Corporate website
- Mexican Blockbuster video website
- Canadian Blockbuster video website
- Australian Blockbuster video website
- Argentinian Blockbuster video website
- Chilean Blockbuster video website
- Italian Blockbuster video website
- Compete: Netflix.com vs Blockbuster.com Traffic Graph
Categories: Companies listed on the New York Stock Exchange | Articles with unsourced statements since March 2007 | All articles with unsourced statements | Articles with unsourced statements since February 2007 | Companies based in Texas | Companies based in the Dallas-Fort Worth Metroplex | DVD rental services | Franchises | Companies established in 1985
