BlockbusterPast and Future Strategies of a Video Rental Giant

Historical Background

Original owner David Cook opened first store in October 1985 in Dallas, Texas

Cook sought out investors in mid 1980’s to expand business

Company went public in 1987 Chicago businessman Wayne

Huizenga owned 60% of the company’s shares

Historical Background

Blockbuster expanded by acquiring other local video rental chains February 1987 bought Video to Go Purchased Erol’s Video Club in

1991 Purchased British Company Ritz

Video of mid-1990’s

Historical Background

Huizenga sold Blockbuster to Viacom in 1994 for $8.4 billion

1985 1990 1995 2000 2005 2010

November 1, 2006 Blockbuster Total Access Introduced

Janurary 1, 2005 Elimination of Late Fees

August 2004, Blockbuster Online

Introduced

October 19, 1985 Opened

first store

August 25, 1986 Opened first

franschise store in San Antonio

June 1987 Blockbuster acquires

Movies to Go

February 1987, Blockbuster goes

public

1994, Viacom purchases

Blockbuster

Early 1990's Acquires U.K.'s Rizv

Video

1998 Netflix is established

Competitive Environment

Chief competitors in current market Movie Gallery Hastings Entertainment Netflix

Competitive Environment

Blockbuster has launched programs such as Blockbuster Total Access to compete with Netflix

Competition in the market has become very fierce because of the variety of video formats available to consumers for home viewing

Competitive Environment

The traditional video store now makes up a much smaller percentage of total video rental market share

Competitors like Netflix offer rental by mail subscriptions and online video downloads

Blockbuster also competes with cable and satellite companies’ pay-per-view offerings

Marketing Strategies and Tactics Blockbuster attempting to respond

to changes in video rental industry by adding services

Relying on its well known brand name to generate revenue

Attempting to set itself apart from rest of industry

Marketing Strategies and Tactics 1998 Blockbuster sponsored the

American Film Institutes 100 Years of Film museum tour

Blockbuster has attempted to use its rental store locations as venues for movie promotion

2002 “Rent it, like it, buy it” promotion

Marketing Strategies and Tactics 2004 “Flip Card” promotion which

enabled card holders unlimited video game rentals for $49.99

2005 Blockbuster eliminated late fees.

Marketing Strategies and Tactics 2006 began the era of head-to-

head competition with Netflix Blockbuster began the year by

offering an extended rental to customers who brought in the flap of a Netflix DVD rental envelope

November 2006 Blockbuster launched Blockbuster Total Access, an online subscription based business similar to Netflix

Human Resource Strategies Blockbuster employs 67,300

employees worldwide Just over 50% of Blockbuster’s

employees are part-time workers Tries to create a culture of fun,

teamwork and exceptional customer service

Human Resource Strategies Company hires roughly 1,800

seasonal employees annually during the busy holiday season in November and December

Blockbuster recruits many full-time and management employees from its large pool of part-time labor

Human Resource Strategies Management structure

Regional Manager

District Manager

Store Manager

Sales Manager

Shift Leader

Customer Service Representative

Circumstances Leading to Change Introduction of Netflix into the video

rental market in 1998 Customers lost to Netflix Revenues lost to Netflix

Course of Action

Creation of Blockbuster by mail and Blockbuster Total Access were created to win back customers lost to Netflix

Netflix signed up 3 million subscribers by 2005

Blockbuster offers a pricing schedule similar to Netflix that allows subscribers to pick a rental plan that works best from them

Course of Action

Reinvented store business by adding consumables such as popcorn, candy and soda to the checkout lanes

Blockbuster eliminated a large source of profitable revenue – late fees – to stay competitive with Netflix and others.

Course of Action

Online video rental business projected to grow by 43% in 2007

Blockbuster is devoting more resources toward the online rental business

Future Global Marketing Consequences

Blockbuster playing catch-up with the following Netflix marketing innovations Movies by mail Movies and TV episodes viewable

on a PC Faster turn around of rentals Larger online rental catalog

Future Global Marketing Consequences Blockbuster must become more

savvy with internet commerce if it is to stay competitive with Netflix

Blockbuster has earned a bad reputation among Netflix loyalists on the web who tend to be very internet savvy consumers

Blockbuster attempting to learn from Netflix early mistakes

Future Global Marketing Consequences Blockbuster must create marketing

innovations that appeal to the younger generation of technology-savvy consumers

This is the only way the company will be able to emerge from Netflix’s shadow and become a major market force again