Blockbuster Inc. (NYSE: BBI) is an American-based chain of DVD, Blu-ray, and video game rental stores. There are more than 7,000 stores in 21 countries worldwide. It is headquartered in the Renaissance Tower in Downtown Dallas, Texas.
History
The first Blockbuster store opened in Dallas, Texas on October 26, 1985. The founder of the company was David Cook, who grew the business and brought it public. The logo was created by Lee Dean, working for the now defunct Rominger Advertising agency.
Scott Beck, a young businessman in Dallas, approached John Melk, prior executive with Waste Management, about buying a franchise. Melk brought the idea to his friend and business associate, Wayne Huizenga, who agreed to buy the company after overcoming initial concerns about the video industry.
Huizenga and Melk used similar techniques in growing Waste Management, and soon, they were opening one store every seventeen hours. They also bought every Blockbuster franchise they could get their hands on (removing pornographic movies). The company became a multi-billion dollar company and was sold to Viacom for a price of $8.4 billion.
The Blockbuster Block Party concept was test-marketed in Albuquerque, New Mexico and Indianapolis, Indiana; Block Party was an "entertainment complex" aimed at adults, containing 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 1992, Blockbuster acquired the Sound Warehouse and Music Plus music retail chains and created Blockbuster Music. In August 1998, Viacom sold the Blockbuster Music chain to Wherehouse Entertainment, who was subsequently purchased by Trans World Entertainment in 2003.
In 1993 Blockbuster proposed a merger with Viacom, however after both companies stocks tumbled in 1994, Viacom eventually purchased Blockbuster.
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 Brooklyn 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). 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.
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-oriented model. His predecessor John F. Antioco attempted this same plan initially in 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.
On February 17, 2008 Blockbuster, Inc. proposed a buyout of struggling Circuit City. However after a due diligence review of Circuit City's financial books by Blockbuster (pushed for by Carl Icahn), Blockbuster withdrew its offer in July 2008. Subsequently Circuit City filed for bankruptcy on November 10, 2008 and after liquidating all its stores ceased operations on March 8, 2009.
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. Sumner Redstone, whose Viacom conglomerate then owned Blockbuster, 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 targeted at other rental chains and film enthusiasts, at that time then between $70–$100 before the end of the initial release period.
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.
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". Titles that are more than 12 months past their initial release date are stored as "Blockbuster Favorite" (non-new release) titles. Typically only one to four rental copies of each title 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 then-sister cable network 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, although due to the First Sale Doctrine, other rental stores and online DVD rental-by-mail companies, like Netflix, can still rent DVDs released by The Weinstein Company.
On February 6, 2009, Blockbuster was listed tenth on U.S. News and World Report' s "15 Companies That Might Not Survive 2009."
Progression to Blu-ray
On June 19, 2007, after a pilot program launched in late 2006, 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 stocks Blu-Ray titles in almost 5,000 stores across the United States, Canada, United Kingdom, Mexico and Australia.
Retail operations
Blockbuster has 3,750 U.S. stores, of which it plans to close between 810 and 960, while planning to open as many as 10,000 video rental kiosks by mid-2010. It has more than 2,600 international stores (operating under Blockbuster and other brands). It has been claimed that there are more than 43 million U.S. households with Blockbuster memberships.
The company had an Irish subsidiary, Xtravision, which did not operate under the Blockbuster brand name. Blockb
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