powerpoint pdfs-3.1_blockbuster pdf

7/22/2019 Powerpoint PDFs-3.1_Blockbuster PDF

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Surviving Disruptive Technologies

Blockbuster

How to Define an IndustryAnd Still Fail


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A short history Opened in 1985 in Dallas

David Cook thought there was a marketfor a family-friendly video rental store

No X or NC-17 films

8,000 videocassettes in appealing

displays

Built a warehouse for fulfillment which

became highly automated distribution center Customized stores with films

geared for the neighborhood

Franchised and expanded to 19 stores

Source: Wikipedia


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A new owner

Needed capital to expand Wayne Huizenga of Waste Managemen

Skeptical about video rentals

Did not own a VCR Became convinced and bought in

$18.5 million for 50% of company


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Rapid expansion

From 1997 to 2004 Became $4 billion company

3700 stores in 11 countries

Revenue from $7.4 million to

$2.2 billion

Market cap grew 118% per year At peak opened one store

every 17 hours!

Source: Coughlan & Illes, Blockbuster Case , Harvard Business School Publishing, 2004


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Expansion

Television studios, music stores Discovery Zone

Make a movie, put it in theaters,

rent in video store, sell on pay-per-

view, show it on cable and play in

TV stations all owned by

Blockbuster; publish the book

release the sound track, and sell

Blockbuster stores


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The Viacom Years

By 1994 Blockbuster stock underperforming Huizenga thought new technologies were years away

Investors nervous, depressing stock

Approached Sumner Redstone

of Viacom

Viacom paid $8 billion for Blockbuster Slimmed the company and used its

cash flow to pay down $10 billion

debt from buying Paramount


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Exit Viacom

Redstone had buyers remorse

Deal from Hell

Satellite movie services impact business

Lack of product

4% decline in movie rentals Viacom sold part of Blockbuster

in an IPO, keeping 80%


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How about a new CEO

1997 John Antioco from Taco Bell become Rent videogames, too

2001 8000 stores in 27 countries,

89,000 employees, $5 billion revenue

2005 Carl Icahn bought 10 millionshares

Antioco lost proxy fight and left


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Bankruptcy 2010 Blockbuster declares Bankruptcy

Bought at auction by Dish Networks for $233 million plusmillion in liabilities About 1000 stores remained

January of 2013 Dish announces

closure of 300 U.S. stores leaving less

than one-third of the stores it acquiredin 2011 Layoffs of 3,000 out of 7,300 remaining

employees


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BLOCKBUSTER

CALENDAR YEAR SALES AND EOY STOCK PRICECALENDAR YEAR SALES IN

MILLIONS OF $

Sales in millions


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What went wrong?

At first some good ideas In cassette days Blockbuster had to pay $6

movie

Led to shortage in stores

Pushed studios for revenue sharing $1 purchase, 40% of rental to studios

Now enough copies in stores


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Disruptions

On-demand: cable providers scheduling pmovie showings

Pay-per-view: stream movie to viewer

Illegal sharing

Antioco thinks it was DVDs Best Buy and Wal-mart want to sell

them for under $20


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Movies by mail?

Antioco skeptical of Netflix model

In 2004 Blockbuster started mail business

Could never make it work!

Eliminated late fees costing $200 million

Starting an online businessrequired another $200

million (why?)


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A lot went wrong

Major management turmoil

Different owners turned capital

for investment on and off

All of senior management denied

that coming technology would disrupt

their business model

When Blockbuster tried to

respond, it failed to execute


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Can you fill out and post a box score forBlockbuster-we can see if there is any

consensus opinion on the reasons Bloc

could not respond to management turm

and disruptive technology

powerpoint pdfs-3.1_blockbuster pdf

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