Blockbuster Inc.
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| Blockbuster Inc. | |
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| Type | Public (NYSE: BBI) |
| Founded | 1985 |
| Headquarters | Renaissance Tower, Dallas, Texas United States |
| Key people | James W. Keyes, CEO, Chairperson |
| Industry | Home Entertainment |
| Products | Retailing-DVD/Video/Video Games |
| Revenue | US$5.23 billion (2006) |
| Employees | 128,000 |
| Website | www.blockbuster.com |
Blockbuster Inc. (NYSE: BBI) is the largest chain of DVD and video game rental stores in the world.[citation needed] It is headquartered at Renaissance Tower in downtown Dallas, Texas.
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[edit] History
Blockbuster began in Dallas, Texas when it opened its first store on October 19, 1985. The founder of the company was Wayne Huizenga. Cook grew the business and brought it public before handing the reins to CEO Joe Mitchell, who quickly grew it into a multi-billion dollar corporation. The company became a part of Viacom Inc. in 1994 at a price of $8.4 billion. Also in 1994, the Blockbuster Block Party concept was test-marketed in Albuquerque, New Mexico and Indianapolis, Indiana; Block Party was an "entertainment complex" aimed at adults, contained eight themed areas housing a restaurant, games, laser tag arena and motion simulator rides and was housed in a windowless building the size of a city block. 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, then called Blockbuster Video were renamed Blockbuster. Older stores have not changed.
In 2002, Blockbuster acquired Movie Trading Company, a Dallas chain that buys, sells, and trades movies and games, to study potential business models for DVD and game trading. Also that year, they acquired Gamestation, a 64 store UK computer and console games retailer chain.
Blockbuster separated from Viacom in 2004 and launched Game Pass nationwide. Online DVD subscription was introduced on Blockbuster.com (aka Blockbuster Online). [1] Blockbuster also rolled out its Game Rush store-in-store concept to approximately 450 domestic company-operated stores. Blockbuster began game and DVD trading in select US stores too. [2]
Overall, 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.
As of February 2006, the company had a market value of almost $500 million.
On July 2, 2007, the company named James W. Keyes (former president and CEO of 7-Eleven) as the new chairman and CEO. Keyes had worked at the convenience store chain for 21 years until 2005, when it was sold to Seven & I Holdings Co. Since this point, he has introduced a new business strategy that includes de-emphasizing the unprofitable Total Access online service, in favor of an in-store, retail orientated model. His predecessor John F. Antioco attempted this same plan initially in 1997. He replaced John F. Antioco who had been leading Blockbuster since 1997. Additionally, Blockbuster Inc. lifted the ban on using check cards to secure rentals of movies and games in excess of the per-visit check out limit. Customers who were once required to use a major credit card are now free to use their check card.
On September 14 2007, Blockbuster GB Limited bought a number of retail stores from ChoicesUK Plc. ChoicesUK is an AIM listed multi-channel distributor and retailer of DVDs, computer games and CDs. The sale will secure employment for approximately 450 employees across 59 stores in the UK. As part of the transaction, Blockbuster GB will re-brand the stores as BLOCKBUSTER.
[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.
[edit] Marketing
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 commercial in the first quarter of Super Bowl XLI.
[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. The trade term is "depth of copy".[1] Titles that are more than one year past their initial release date are stored as "Blockbuster Favorite" (non-new release) titles. Typically only one in four 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. Some of these copies are sold as "previously viewed" for around $10-15, sometimes as low as $3.99. Most Blockbuster locations also accept trade-ins of used DVDs which are sold alongside the existing stock of previously rented movies.
Representing itself as a family-friendly chain, Blockbuster has never rented or sold pornographic titles in the US market (other markets vary), though the stores carry R-rated and unrated films, including a large number of "soft porn" titles (including Red Shoe Diaries. Red Shoe Diaries was distributed exclusively by Blockbuster in a now expired agreement with Showtime during the Viacom era). Blockbuster requires employees to check ID and does not allow rental of youth restricted titles with a rating over R to children under 17 unless their parents have specifically allowed it through a family account.
Blockbuster has been the exclusive rental chain for The Weinstein Company movies since January 1, 2007,[2] although due to the First Sale Doctrine, other rental stores can still rent DVDs released by The Weinstein Company.
After a pilot program launched in late 2006, on June 19, 2007, Blockbuster announced that it had chosen Blu-Ray over HD-DVD rental format to rent out in a majority of its stores. In the pilot program, Blockbuster offered selected titles for rental and sale in 250 stores. Blockbuster now plans to stock Blu-Ray titles in almost 5,000 stores across the United States and Canada.[3]
[edit] Retail operations
Blockbuster has many locations in over thirty countries, including the United States, Canada, Mexico, Argentina, Uruguay, Ireland, Panama, Puerto Rico, UK, Australia, New Zealand, Israel, Brazil, Chile, Taiwan, Italy, Denmark, Venezuela, and Colombia.
Blockbuster states that it currently has 5,192 stores across the United States. International stores (operating under Blockbuster and other brands) totaled 3,291, in 2004 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. [3]
The company has an Irish subsidiary, Xtravision, which does not operate under the Blockbuster brand name.
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. headquarters’ strategy to focus on core rental business. Metropolitan Victoria (Melbourne) was the last remaining significant concentration of corporate stores.
In December 2004, Blockbuster announced it wanted to pursue a hostile takeover of Hollywood Video, its major U.S. competitor. In response, Hollywood Video agreed to a buyout in January 2005 by a smaller competitor, the Dothan, Alabama-based Movie Gallery.
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.[4]
On June 29, 2007, The Hollywood Reporter reported that Blockbuster announced on June 28, 2007 that the company would be closing 282 US stores that year.
On December 18, 2007, a store in Dallas was renamed Blockbuster Media.
Blockbuster has announced that it plans to shut down its stores in Peru, Chile, Argentina and Uruguay, where piracy has had a large effect on the movie market.[5] The company has already closed down its stores in Ecuador, Spain and El Salvador.
[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 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 to just a games section.
[edit] Blockbuster Online
[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.[6]
Blockbuster's U.S. online operation started with around 10 warehouses; further expansions every year have brought that number to 41, plus 1400+ stores in the Blockbuster Online network. Most Blockbuster independent franchises do not honor the Total Access program. The company had 1.5 million subscribers at the end of the third quarter of 2006 (as compared to 5.6 million for Netflix).[7] 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.
Currently Blockbuster offers several online rental plans. Until July 26, 2007, Blockbuster offered and advertised unlimited free in-store exchanges of online rentals with all plans, included free of charge. Blockbuster currently offers the original plans for the original price with limited in-store exchanges and for a substantially higher price point, the consumer may have the original plan with unlimited in store exchanges. The change was due to what can only be perceived as a tactical maneuver to prevent the consumer from over utilizing the in-store exchange benefit, (reference Blockbuster incident #070819-005769). As of September 2007, the online system was changed to the new online system of a few in store exchanges instead of unlimited. Many customers saw this as a draw back to the system and threats to move to Netflix ensued.
As of December 20, 2007, many subscribers to their online service received emails stating that by the 27th of that month, their pricing plan would change once again. For example, the 3-at-a-time, unlimited exchange in store plan went up ten dollars to $34.99. This practice made many subscribers threaten to or actually drop their relationship with Blockbuster completely and go to Netflix or another competitor.
At the end of 2006, Blockbuster Total Access had 2.2 million customers, exceeding their original goal of 2 million, according to the official website. [4] After an aggressive media campaign that accounted for much of Blockbuster's $46.4 million net loss in the first quarter of 2007, the Total Access subscriber base surpassed 3 million customers in total, marking the company's highest subscriber growth quarter ever. [5]
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.[8]
The domain blockbuster.com attracted at least 42 million visitors annually by 2008 according to a Compete.com survey. This is one-fifth of the numbers of netflix.com. [9]
[edit] United Kingdom
In the UK, Blockbuster has been providing a version of online rentals since October 2002 with its "Pay Per Rent" service.[10][11] 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).[12]
In May 2004, Blockbuster also introduced a conventional online subscription service. The unlimited 3-disc plan is £14.99/month. Unlike the US service, there is no in-store disk exchange.
Blockbuster's online service has continued to make headway against its more heavily promoted rival LoveFilm, earning accolades in 2006 as the best DVD rental service in an head-to-head test against other similar services by UK magazine Web User, as well as being judged as having the fastest turnaround of titles by DVD rental comparison site ChooseDVDRental.
[edit] Brazil
Blockbuster is the largest rental store in the entire country. But the finances were not good enough due the high rental prices. Americanas the largest brazilian department store acquired half of the shares and now it's named under Americanas Express Blockbuster. The store layout is now similar to a regular american store with a Game Rush. But instead of games it offers electronics goods like computers and DVD Players, groceries like candies and microwave popcorn, and even toys from Mattel and Grow, a company that makes brazilian versions of Hasbro's board games.
[edit] Movielink acquisition
On August 8, 2007, Blockbuster announced that they have reached an agreement to purchase Movielink. According to the 8-K filing by Blockbuster, the total purchase price was $6.6 million. The exact terms of the agreement have yet to be disclosed, but it can be assumed that the deal will include content agreements with the major studios, thus giving Blockbuster access to one of the largest libraries of downloadable movies.[citation needed]
Purpose
The purpose of Blockbusters information system is to keep track of when people rent DVDs and inform them if a DVD is not returned, and to keep track of existing customers, to get information from customers by getting them to fill out forms, and advertise to find new customers, and keep records of sales.
[edit] Throttling
In 2006, Netflix (Blockbuster competitor) shareholder Rick Munarriz reported that Blockbuster Online's allocation process — termed throttling — gives customers who rent the fewest movies per month a priority in shipping and selection.[13] The company denies the practice of throttling,[14] which is specifically permitted under Blockbuster Online's terms of service.[15][16]
[edit] References
- ^ Marci Magiera, [http://www.videobusiness.com/blog/1120000312/post/2000020400.html "Revenue sharing all over again? ", Video Business (online), January 18, 2008
- ^ Blockbuster signs deal to be exclusive renter for Weinsteins - USATODAY.com
- ^ Blockbuster: Blu-ray In Almost 5,000 Stores- TVpredictions.com
- ^ Blockbuster to sell Australian business to Video Ezy | Reuters
- ^ Blockbuster shuts down in Peru, piracy blamed | Entertainment | Industry | Reuters
- ^ Press Releases
- ^ Blockbuster reports narrowed Q3 loss - 11/2/2006 - Video Business
- ^ Memphis Daily News - Blockbusted! Local franchisee sues Blockbuster Inc., alleges Dallas company 'undercut' its business - 1/5/2007
- ^ Blockbuster trails Netflix five-to-one online
- ^ Blockbuster reports narrowed Q3 loss - 11/2/2006 - Video Business
- ^ Blockbuster.co.uk - Signup to Unlimited DVD Rental - What's Pay Per Rent All About
- ^ Blockbuster.co.uk - Help - Pay Per Rent Quick Start Guide
- ^ Munarriz, Rick (2006-02-13). Genie in a Throttle. Motley Fool. Retrieved on 2007-12-29.
- ^ BLOCKBUSTER Online Doesn't Throttle Customers!. Blockbuster. Retrieved on 2007-12-29.
- ^ Munarriz, Rick (2006-02-15). Blockbuster Follows Netflix, Again. Motley Fool. Retrieved on 2007-12-29.
- ^ Blockbuster Online - Terms and Conditions. Blockbuster (2007-07-26). Retrieved on 2007-12-29. “Selection and Allocation of Product. BLOCKBUSTER Online will automatically ship titles to you, up to your maximum number of outstanding BLOCKBUSTER Online Rentals, from and in the order that you have listed in your rental queue, subject to availability. However, BLOCKBUSTER Online reserves the right to determine product allocation among members in its sole discretion. In determining product allocation, we use various factors including, but not limited to, (i) the historical rental volume for each subscriber, (ii) historical number of outstanding rentals relative to the maximum number of outstanding BLOCKBUSTER Online Rentals allowed under a subscriber's plan, and (iii) the average rental queue position of BLOCKBUSTER Online Rentals that have shipped to a subscriber in the past.”
