Blockbuster (retailer)
 | |
| Company type | Public (NYSE: BBI) |
|---|---|
| Industry | Home Entertainment |
| Founded | 1985 |
| Headquarters | Renaissance Tower, Dallas, Texas  United States |
Key people | James W. Keyes, CEO, Chairperson |
| Products | Retailing-DVD/Video/Video Games |
| Revenue | US$5.23 billion (2006) |
Number of employees | 128,000 |
| Website | [1] |
Blockbuster (NYSE: BBI) is one of the largest chains of DVD and video game rental stores in the world.[citation needed] It is headquartered at Renaissance Tower in downtown Dallas, Texas.
History
Blockbuster began in Dallas, Texas when it opened its first store on October 19, 1985. The founder of the company was 29-year-old David P. Cook. 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. 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). [2] 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. [3]
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 under $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. 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.
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.
Blockbuster Rewards
Blockbuster Rewards is an optional, paid membership program that began in 1999. For a yearly fee (usually $9.95 plus tax), 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. 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.
Within Canada, the Blockbuster Rewards Membership is assembled slightly differently. For one, the monthly non-New Release movie coupon has been discontinued. The "Rent Five, Get One Free" promotion applies only to New Release and Video Game paid rentals, but there is no limit on how many one may accumulate within a calendar month.
The promotion where a customer can receive a free non-New Release movie with the paid rental of a New Release movie is only available to "Gold Rewards," and the window of opportunity is extended to Sunday through Thursday. The "Gold Rewards" membership is a free upgrade on the normal "Blue Rewards" membership, and is given to any Rewards customer accounts that accumulate 100 paid new release rentals within one year. If this volume of rentals is maintained, the annual fee is waived, and the customer continues to be a "Gold Rewards" member without having to renew.
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.
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 1-2 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.
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 Jammer campaign started again in 2007 starting with a commercial in the first quarter of Super Bowl XLI.
Elimination of late fees
On January 1, 2005 Blockbuster introduced their "Life after late fees" program. 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 if the store offers the movie as previously viewed product.) 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 $1.35. 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. These terms are available at participating stores only. Franchisee restocking fees may vary.
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 $3.99. 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.
Representing themselves as a family-friendly chain, Blockbuster has always banned pornography (except in the New Zealand market), 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.
Blockbuster has been the exclusive rental chain for The Weinstein Company movies since January 1, 2007 [1], although due to the First Sale Doctrine, other rental stores can still rent DVDs released by The Weinstein Company.
On June 19, 2007, Blockbuster made an announcement to choose Blu-Ray over HD-DVD rental format to rent out in a majority of its stores after a pilot program launched in late 2006, in which Blockbuster offered selected titles for rental and sale in 250 stores. Blockbuster now plans to stock Blu-ray only in 1450 of its stores, but says in the 250 stores with the HD-DVD movies, they will be kept on the shelf.[citation needed]
Retail operations
Blockbuster has many locations in over thirty countries, including the United States, Canada, Mexico, Argentina, Uruguay, Ireland, Puerto Rico, UK, Australia, New Zealand, Israel, Peru, Brazil, Chile, Taiwan, Italy, Denmark, Venezuela, and Colombia.
They currently have 5192 stores across the U.S. 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. [4]
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.[2]
Store closures
On June 29, 2007, The Hollywood Reporter reported that Blockbuster announced on June 28, 2007 that the company would be closing 282 stores that year.
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
In August 2004, Blockbuster introduced an online DVD rental service in the U.S. to compete with the established market leader, NetFlix.[3]
Blockbuster's U.S. online operation started with around 10 warehouses; further expansions every year have brought that number to 36 (5 more to open in late 2007), 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).[4] 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 26th, 2007 Blockbuster offered and advertised unlimited free in-store exchanges of online rentals with all plans, included free of charge. Blockbuster now 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). 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. [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. [5]
United Kingdom
In the UK, Blockbuster has been providing a version of online rentals since October 2002 with its "Pay Per Rent" service.[6][7] 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).[8]
In May 2004, Blockbuster also introduced a conventional online subscription service. The unlimited 3-disc plan is £14.99/month.
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.
Movielink Acquisition
On August 8th, 2007, Blockbuster Inc. announced that they have reached an agreement to purchase Movielink. The exact terms of the agreement has yet to be disclosed, but it can be assumed that the deal will include content agreements with the major studies, thus giving Blockbuster access to one of the largest libraries of downloadable movies.
Controversies
Throttling
In 2005, it was reported that Blockbuster Online's allocation process - referred to by many as "throttling" - gives customers who rent the fewest movies per month a priority in shipping and selection.[9][10] Customers who tend to rent more movies on average may see some of their shipments delayed, either because they are sent across country, or sent in an order not necessarily requested by the customer. This policy, which extends beyond Blockbuster Online, has caused controversy within the online movie rental market.
While some online movie rental companies, such as Netflix, readily admit to having practiced delayed movie allocation, Blockbuster has not confirmed or denied such accusations.[11] Since Blockbuster Online's inception in 2004, some customers have complained about receiving delayed movie shipments and not receiving movies as ordered, yet none of these claims have yet to be substantiated.[12] Blockbuster Online has since modified its licensing terms to potentially allow the practice of delayed movie allocation.[13]
Wikipedia Editing
In 2007, searches on Wikipedia Scanner revealed that Blockbuster employees had made nearly 70 anonymous edits to Wikipedia, including the insertion of advertisements and promotions to its article.[14] Blockbuster has not commented publicly on these practices.
References
- ^ http://www.usatoday.com/money/media/2006-11-15-blockbuster-weinsteins_x.htm
- ^ http://www.reuters.com/article/consumerproducts-SP/idUSN2217493920070223
- ^ http://www.b2i.us/profiles/investor/ResLibrary.asp?BzID=553&ResLibraryID=6807&GoTopage=5&Category=27
- ^ http://www.videobusiness.com/article/CA6387895.html
- ^ http://www.memphisdailynews.com/Editorial/StoryFocus.aspx?&id=95692
- ^ http://www.videobusiness.com/article/CA6387895.html
- ^ http://www.blockbuster.co.uk/bandsignup/whatspayperrent.aspx
- ^ http://www.blockbuster.co.uk/Help/PayPerRentQuickStart.aspx
- ^ http://www.fool.com/investing/general/2006/02/15/blockbuster-follows-netflix-again.aspx
- ^ http://www.hackingnetflix.com/2005/09/blockbuster_thr.html
- ^ http://www.wired.com/science/discoveries/news/2006/02/70205
- ^ http://digg.com/tech_news/Blockbuster_Admits_To_Throttling_Too
- ^ http://www.blockbuster.com/corporate/termsAndConditions
- ^ http://blog.wired.com/27bstroke6/wikiwatch/