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Blockbuster_Inc

Blockbuster Inc.

Blockbuster Inc. is the largest chain of DVD and video game rental stores in the world. It is headquartered at Renaissance Tower in downtown Dallas, Texas.

History

The first Blockbuster store was opened in Dallas, Texas on October 19, 1985. The founder of the company was David Cook, who grew the business and brought it public.

Scott Beck, a student in Dallas Texas, approached John Melk, prior executive with Waste Management, about buying a franchise. Melk brought the idea to his best-friend and business associate, Wayne Huizenga, who agreed to buy the company after overcoming initial concerns about the video industry.

It didn't take long for Huizenga and Melk to perform the similar techniques they used 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 and made sure that any pornographic movies were removed from the stores. Quickly, 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 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). 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.

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. 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..

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.

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 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, although due to the First Sale Doctrine, other rental stores can still rent DVDs released by The Weinstein Company. 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 plans to stock Blu-Ray titles in almost 5,000 stores across the United States and Canada.

Retail operations

Blockbuster has many locations in over thirty countries, including the United States, Argentina, Australia, Brazil, Canada, Mexico, Uruguay, Ireland, Panama, Puerto Rico, UK, New Zealand, Israel, 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.

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.

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, where piracy has had a large effect on the movie market. The company has already closed down its stores in Ecuador, Spain and El Salvador.

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.

Blockbuster Online

United States

In August 2004, Blockbuster introduced an online DVD rental service in the U.S. to compete with the established market leader, Netflix.

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. 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 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. As of September 2007, the online system was changed to the new online system of a few in store exchanges instead of unlimited.

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. 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.

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.

United Kingdom

In the UK, Blockbuster has been providing a version of online rentals since October 2002 with its "Pay Per Rent" service. 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).

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.

Brazil

Blockbuster is the largest rental store in the entire country. But the finances were not good enough due the high rental prices. Lojas 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. Blockbuster sold its Brazilian stake in 2007 for a steep loss.

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.

References

External links

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