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Blockbuster (movie rental store)

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Blockbuster (movie rental store)

This article is about the video rental company. For other uses, see Blockbuster.

Blockbuster LLC
Wholly owned subsidiary of
Dish Network[1]
Industry Home Entertainment
Founded 1985 (as Blockbuster Video)
1997 (as Blockbuster (Blockbuster LCC))
Headquarters Englewood, Colorado, U.S.
Area served United States, United Kingdom, New Zealand, Denmark, Brazil, Australia, Mexico
Key people Michael Kelly President
Dennis McGill Executive Vice President and CFO
Products Retailing and renting of DVD, VHSs, Blu-ray, video games, and digital content
Parent Independent (1985–1990, 2004–2011)
Erol Onaran (1990–94)
Viacom International Productions Inc. (1994–2004)
Dish Network Corporation (2011–present)
Website

Blockbuster LLC, formerly Blockbuster Inc., is an American-based provider of home movie and video game rental services, originally through video rental shops (both owned and franchised), later adding DVD-by-mail, streaming, video on demand and cinema theater.[2] At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores.[3][4] Because of poor strategic planning, mismanagement and competition from other video rental companies such as Netflix and Redbox, Blockbuster lost significant revenue and filed for bankruptcy on September 23, 2010.[5] On April 6, 2011, the company and its remaining 1,700 stores were bought by satellite television provider Dish Network at auction for $233 million and the assumption of $87 million in liabilities and other obligations.[6] The acquisition was completed on April 26, 2011.[7] Dish closed 200 branches in July 2011,[8] 500 more in the first half of 2012,[9] and another 300 in 2013.[10]

History

1980s: early years

The first Blockbuster store opened October 1985 in Dallas, Texas at the corner of Skillman and Northwest Highway.[11][12] The founder of the company was David Cook, who grew the business and brought it public. The innovation was derived from Cook's experience with managing huge databases.

After the first few stores opened, he built a $6 million warehouse in Garland, Texas, that could pull and package multiple stores in a day. Key to the early success of Blockbuster was their ability to customize a store to its neighborhood, loading it up with films geared specifically to demographic profiles in addition to the popular new releases, and a sizable collection of catalog titles.[13] The logo was created by Lee Dean.

In 1987, the company won a court case against Nintendo of America, Inc, which paved the way for the rental of videogames.[14]

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.[15]

Huizenga and Melk used similar techniques in growing Waste Management, and soon, they were opening one store every 24 hours.[16] They also bought every Blockbuster franchise they could get their hands on (removing pornographic movies). At the helm, Huizenga spent the late 1980s acquiring several of Blockbuster's key rivals—most notably Major Video.

1990s: growth and acquisition by Viacom

In 1990 Blockbuster bought mid-Atlantic rival Erol's which had more than 250 stores. In 1992, Blockbuster acquired the Sound Warehouse and Music Plus music retail chains and created Blockbuster Music.

In October 1993, Blockbuster acquired controlling interest in Spelling Entertainment Group, a media company run by television producer Aaron Spelling.[17] They also owned a large stake (35%) in Republic Pictures; that company merged with Spelling in April 1994.[18]

The company became a multi-billion dollar company and in 1993 proposed a merger with Viacom. However, after both companies' stocks tumbled in 1994, Viacom purchased Blockbuster for $8.4 billion.[19][20]

The Blockbuster Block Party concept was test-marketed in Albuquerque, New Mexico and Indianapolis, Indiana during the year 1994. It 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.[21]

During the 1990s, Blockbuster expanded in the United Kingdom by purchasing that country's Ritz Video chain. The stores were rebranded to Blockbuster, making it the number one rental chain in that country.

In 1996, the Blockbuster Entertainment Corporation was renamed Blockbuster, Inc. and the retail stores, then called Blockbuster Video, were renamed Blockbuster. During that year Blockbuster, which was then headquartered in Fort Lauderdale, Florida, began studying the idea of moving its headquarters into the Renaissance Tower in Downtown Dallas.[22] In November 1996 Blockbuster confirmed that it was moving into the Renaissance Tower.[23] Most of the workers at the Florida headquarters did not want to relocate, so Blockbuster planned to hire around 500 to 600 new employees for its Dallas headquarters. The company had offered various relocation packages to all of its Fort Lauderdale employees.[24] In 1998, Blockbuster created DEJ Productions which acquired 225 films primarily to provide exclusive content to its Blockbuster stores prior to being sold off to First Look Studios in 2005.[25] During that same year, Blockbuster bought the Irish video rental store Xtra-vision, with over 200 stores in Ireland and the UK. In 2009, Blockbuster sold off its Irish operations to Birchall Investments, with the few Xtra-vision stores in the UK being rebranded as Blockbuster.

In August 1998, Viacom sold the Blockbuster Music chain to Wherehouse Entertainment, who was subsequently purchased by Trans World Entertainment in 2003.[26]

2000s: further acquisitions and independence from Viacom


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, it 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).[27] 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.[28]

In May 2005, financier Carl Icahn waged a successful proxy fight to add himself and two other members to the board. Icahn accused Blockbuster of overpaying Chairman and CEO John F. Antioco, who had served in that capacity since 1997, receiving $51.6 million in compensation for 2004. Icahn was also at odds with Antioco on how to revive profit at Blockbuster; Antioco scrapped late fees in January, started an Internet service, and wanted to keep the company independent, while Icahn wanted to sell out to a private equity firm.[29] In 2007, Antioco left the company, reportedly due to continued controversy over his compensation. He left with a $24.7 million severance package.[30]

On July 2, 2007, the company named James W. Keyes (former president and CEO of 7-Eleven) as the new chairman and CEO. He introduced a new business strategy that included 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 in 1997. Additionally, Blockbuster lifted the ban on using check cards to secure rentals of movies and games in excess of the per-visit checkout limit.

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 secured employment for approximately 450 employees across 59 stores in the UK. As part of the transaction, Blockbuster GB decided to rebrand the stores as Blockbuster.

On February 17, 2008, Blockbuster 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. Analysts were not favorable to the proposed deal, viewing it as a desperate effort to save two struggling retailers rather than a bold turnaround initiative.[31] It even earned CEO James Keyes a spot on Jim Cramer's Mad Money Wall of Shame before the offer was withdrawn. Subsequently Circuit City filed for bankruptcy on November 10, 2008 and, after liquidating all of its stores, ceased operations on March 8, 2009.[32]

2010-2013: bankruptcy and acquisition by Dish Network

On February 10, 2010, Blockbuster announced that it would cease all its operations in Portugal, closing down 17 outlets and leaving over 100 workers unemployed. Blockbuster representatives in Portugal blamed Internet piracy and the lack of government response to it as the key factors to the company's bankruptcy in the country.[33] By March 2010, Blockbuster was in talks to sell its European operations altogether, but would not disclose the details.

On March 1, 2010, Blockbuster began "Additional Daily Rates," or "ADRs," for rentals not returned by their due date in the United States, having already used this procedure in other countries such as the UK for many years. An "Additional Daily Rate" was charged for each day a member chooses to keep the rental beyond the rental terms.

On March 12, 2010, PricewaterhouseCoopers, Blockbuster's independent registered public accounting firm, issued its audit opinion disclosing substantial doubt about Blockbuster's ability to continue as a going concern. This report was included in Blockbusters's 10-K SEC filing. On March 17, 2010, Blockbuster issued a bankruptcy warning after continued drops in revenue threatened its ability to service its nearly $1 billion debt load.

By April 1, 2010, Carl Icahn had resigned from Blockbuster's board of directors and sold nearly all his remaining Blockbuster stock.[34]

In May 2010, the liquidation of Movie Gallery began, leaving Blockbuster as the only remaining national video rental chain in the United States.[35] During the same month, a dissident shareholder, Gregory S. Meyer, in an effort to be elected to Blockbuster's board of directors, engaged in a proxy battle with Blockbuster's board, alleging that the board had been responsible for significant destruction of value to shareholders. Mr. Meyer was elected to the board at Blockbuster's shareholder meeting in Dallas on June 24, 2010.

On July 1, 2010, the company was delisted from the New York Stock Exchange after its shareholders failed to pass a reverse stock split plan aimed at heading off involuntary delisting because of the stock's trading at well below $1 per share.[36] The stock was then traded on the OTCBB (over-the-counter bulletin board).

Blockbuster was unable to make a $42.4 million interest payment to bondholders and was given until August 13, 2010 to pay off the debt. The company hired Jeff Stegenga to be its chief restructuring officer (CRO) in an effort to satisfy bondholder demands and recapitalize the company. After failing to pay on August 13, bondholders gave Blockbuster until September 30, 2010.

On August 26, 2010, news media reported that Blockbuster was planning to file a pre-packaged Chapter 11 bankruptcy in mid-September. In light of this news, the company's chief financial officer (CFO), Tom Casey, resigned on September 11. He was replaced by Dennis McGill, formerly CFO of Safety-Kleen Systems, Inc.

On September 22, 2010, a source close to Blockbuster announced it would be filing for Chapter 11 in a few days. The company was carrying some $900 million in debt.[37]

On September 23, 2010, Blockbuster filed for Chapter 11 bankruptcy protection due to challenging losses, $900 million in debt and strong competition from Netflix, Redbox and video on-demand services. Blockbuster lagged behind these competitors in online rentals, Redbox-style kiosks, and streaming video.[38] Movie Gallery/Hollywood Video had filed for Chapter 7 bankruptcy liquidation earlier in 2010 for similar reasons.[39]

At the time of Chapter 11 filing, Blockbuster said it would keep its 3,300 stores open;[40] however, the company was expected to close over 900 stores by the end of 2010. In December 2010, Blockbuster announced it would close an additional 182 stores by the end of April 2011 in attempts to emerge from bankruptcy.[41] It was reported in February 2011 that Blockbuster and its creditors had not come up with a Chapter 11 exit plan and that the company would be sold for $300 million or more, along with taking over debts and leases.[40] Blockbuster has admitted that it may not be able to meet financial obligations required under its Chapter 11 filing, a circumstance which could mandate conversion of the bankruptcy filing to Chapter 7 (liquidation).[42]

On March 1, 2011, the U.S. Department of Justice filed a claim disclosing that Blockbuster does not have the funds to continue reorganizing and should liquidate.

In April 2011, Blockbuster's landlords objected to its assumption of leases that it sought to assign to soon-to-be-owner Dish Network Corp., claiming that they did not have adequate assurance that the new owner would honor those leases.[43]

On August 31, 2011, the liquidators announced the closure of the remaining 253 Canadian stores and shuttering of the entire Canadian unit.[44]

On March 28, 2011, South Korean telecommunications company SK Telecom made a surprise bid to buy Blockbuster.[45] Dish Network had also expressed interest in bidding, as did Carl Icahn, despite calling Blockbuster "the worst investment I ever made."[46] Dish eventually won the auction on April 6, 2011, agreeing to buy Blockbuster for $320 million.[47] On April 19, 2011, it was announced that Dish would only keep 500 Blockbuster stores open. At its peak, Blockbuster had more than 4,000 stores nationwide.

In April 2011, Dish Network told the U.S. Bankruptcy Court that it needed more time to negotiate with landlords in an effort to keep more than 600 Blockbuster stores open.[48] The deal was finalized on April 26, 2011.

On Friday, January 13, 2012, Dish CEO Joseph Clayton announced that while Dish had planned to keep 90 percent of the stores in operation (meaning around 15,000 employees would remain employed), because of market factors “there are ones that aren't going to make it. We will close unprofitable stores. We will close additional stores.” Clayton did not say when these additional closings would happen and only remarked that some stores were not turning a profit. The Dish chief would not say which stores the company was planning to close, but that each potential closing was to be assessed on a "case by case basis."[49]

On October 4, 2012, Dish Network announced that it was scrapping plans to make Blockbuster into a Netflix competitor.[50]

On January 22, 2013, Dish Network announced that Blockbuster would be closing 300 more stores. John Hall of Dish Network said that some stores were to be closed as their leases ended, while others would be shut down for underperformance. However, Hall also said that Dish Network will continue to operate 500 stores in the United States and that "we continue to see value in the Blockbuster brand and we will continue to analyze store level profitability and -- as we have in the past -- close unprofitable stores".[51]

Plans for additional store closings were announced on August 6, 2013. This would leave the chain with 350 locations nationwide.[52][53]

Blockbuster Entertainment Awards

Blockbuster Inc. ran an awards show, the Blockbuster Entertainment Awards, annually from 1995 to 2001. In November 2001, Blockbuster announced that it was cancelling the awards following concerns after the September 11 attacks.[54][55]

Senior management

  • Michael Kelly, President: 2011–present
  • Dennis McGill, Executive Vice President and Chief Financial Officer: 2010–present
  • Kevin Lewis, Senior Vice President and Chief Marketing Officer: 2008–present
  • Greg Nichols, Senior Vice President of Human Resources: 2011–present

Chief executive officers

Business model

The standard business model for video rental stores had traditionally been to pay a large flat fee per video, approximately $65, and offer unlimited rentals for the lifetime of the medium 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 a 60 percent rental fee, paying the other 40 percent to the studio, and reporting rental information through Rentrak. In addition to benefiting from a lower initial price, Blockbuster also capitalized on the fact that that movies were generally not available for purchase at affordable price points during initial release periods. Thus customers had a choice to rent, wait or buy the film on tape at the much higher Manufacturer's Suggested Retail Price targeted at other rental chains and film enthusiasts, which at that time ranged between $70–$100 per title.

Quantity and selection of titles

Blockbuster, like most other rental stores, tended 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".[56] Titles more than 12 months past their initial release dates were stored as "Blockbuster Favorite" (non-new release) titles. Typically only one to four rental copies of each title were retained past the first year of release. The large volume of new release copies were typically sold after the initial renting rush. Some of these copies were sold as "previously viewed" for around $10–$15, sometimes as low as $3.99. Most Blockbuster locations also accepted trade-ins of used DVDs, which were sold alongside the existing stock of previously rented movies.

Representing itself as a family-friendly chain, Blockbuster never rented or sold pornographic titles in the US market (other markets vary). However, the stores did carry R-rated and unrated films, including a large number of "soft porn" titles (including Red Shoe Diaries, which was distributed exclusively by Blockbuster in an agreement with then-sister cable network Showtime during the Viacom era). Blockbuster required employees to check ID and did not allow rental of "Youth Restricted Viewing" titles with an R rating to children under 17, unless their parents had specifically allowed it through a family account.

Blockbuster has been the exclusive rental chain for The Weinstein Company movies since January 1, 2007,[57] although due to the First Sale Doctrine, other rental stores and online DVD rental-by-mail companies, like Netflix, could still rent DVDs released by The Weinstein Company.

Adoption of 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 in a majority of its stores. In the pilot program, Blockbuster offered selected titles for rental and sale in 250 stores. Blockbuster stocked Blu-ray titles in almost 5,000 stores across the United States, Canada, United Kingdom, Mexico and Australia.[58]

Retail operations

At the beginning of 2010, Blockbuster had over 4,000 US stores and 2,500 international stores.[59] In the United States, it planned to close between 810 and 960 retail stores and instead launch as many as 10,000 "Blockbuster Express" video rental kiosks by the middle of 2010.[60] It has been claimed that more than 43 million U.S. households had Blockbuster memberships.[61]

In December 2004, Blockbuster announced its intention 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. Since then, Movie Gallery has filed for bankruptcy twice and its entire chain of stores has been liquidated.

In March 2010, Blockbuster paired up with Time Warner Inc. to have Warner Bros. movies be made available in Blockbuster stores on the DVD release date and not be subject to a four-week delay in availability. Similar agreements were also made with Universal and 20th Century Fox. Also in 2010, Blockbuster shuttered 545 operated stores.

Blockbuster Express

Blockbuster Express is a movie-rental kiosk brand sublicensed for use by Redbox from licensee NCR Corporation. In 2011, nearly 10,000 Blockbuster Express kiosks were in operation.[62] Apart from the license to use the Blockbuster brand name, Blockbuster Express kiosks are unrelated to Blockbuster LLC, its stores, its DVD-by-mail service or its online streaming service.

GameRush

In the summer of 2003, Blockbuster started converting some stores to GameRush stores. These stores sold and bought consumer DVDs, games, gaming systems and accessories. GameRush was positioned as a direct competitor to stores such as GameStop and Game Crazy. Blockbuster used its location status to get instant coverage; it also promoted 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 discontinuation of late fees, GameRush was put on the chopping block. In April 2007, GameRush stores were reduced back to just a games section.

Blockbuster UK operated trade functions in all their stores, buying and selling pre-owned consoles, DVDs games and accessories, and price-matching with competitors by offering either store credit or cash for trade-ins.

International

Australia


In Australia, the first Blockbuster store was opened in 1991 in Melbourne. In 1992, the Virgin Group and Blockbuster Inc entered into a joint venture to set up Australia's first Virgin Megastores in Sydney, Melbourne and Adelaide. This lasted until Virgin sold their interest in the six stores to Blockbuster, who promptly rebranded them in 1993 to Blockbuster Music. In 1994 Australian store numbers rose to 54 with the acquisition of Major Video and Focus chains in both Victoria and South Australia. In 1995, the growth continued with the opening of the 100th video store in the country. By the end of 1998, Blockbuster Australia had opened over 125 stores. In July 1998, Blockbuster Australia launched into franchising with the conversion of the former Video Flicks franchise group in Queensland, and the former Movieland group in Western Australia six months later. Also in 1998, the company sold its last two Australian Blockbuster Music stores in Pitt Street, Sydney and Chapel Street, Melbourne to Brazin Limited, who incorporated them under their Sanity Entertainment brand. Throughout 1999 and 2000, Blockbuster Australia quickly expanded its franchise store network through the conversion of smaller groups and the granting of individual franchises. Before 2005, this was done through the acquisition of the Movies Plus Group and the conversion of some individual Movies 4U and Movieland outlets.[63][64][65]

In February 2007, Blockbuster sold its entire Australian store network to Video Ezy Australasia Pty Ltd. At the time, Blockbuster Australia comprised 370 outlets nationwide - 29 owned by the company and 341 owned by franchisees. Video Ezy had 518 Australian outlets, all of them being owned by franchisees, pushing the combined group's market share to 40% of the country's video rental sector. Video Ezy committed to the master franchise agreement with Blockbuster for 10 years operating the brand with the possibility of renewal for a further 10 years after that. As a consequence of the deal, the company changed its name from Video Ezy Australasia Pty Ltd to Franchise Entertainment Group (FEG).[66][67][68][69]

In October 2010, FEG transferred control of the

Brazil

Blockbuster was the largest video rental chain in the country. But finances were not good enough due to the high rental prices. Lojas Americanas the largest Brazilian department store acquired half of the shares and now it is 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 Hasbro's board games. Blockbuster sold its Brazilian stake in 2007 for a steep loss.

Canada


In Canada, Blockbuster Canada had operated independently, and it initially remained financially stable.[73] It began a partnership with Wind Mobile in December 2009, selling mobile phones at all stores in cities where Wind's service was available. Phone sales began in Toronto and Calgary, later expanding to other cities with Wind coverage. Some stores even featured a full Wind "store-in-a-store" for postpaid activations and a larger selection of devices.[74] However, on May 3, 2011, it was announced that the company had gone into receivership.[75] On May 25, 2011, it was announced that 146 stores, accounting for approximately 35% of the company's stores in Canada, would be shut down effective June 18, 2011. On August 31, 2011, Blockbuster Canada announced that no buyer could be found for its remaining stores that were acceptable to the court-appointed bankruptcy receiver, and that it would wind down operations and close all stores by December 31, 2011. The company had acted as a guarantor towards Blockbuster's remaining debt.[76]

Denmark

Blockbuster came to Denmark in 1996 with the acquisition of the 29 Christianshavn Video stores. Since then, it has opened many stores across the country and is now at 51 stores in total. The stores are open 365 days a year with hours usually from 10 am to 10 pm

Ireland

In March 2010, Blockbuster announced that it intended to sell all operations in Europe. The company once had an Irish subsidiary, Xtravision, which did not operate under the Blockbuster brand name. Blockbuster sold Xtravision at a loss in August 2009 to Birchhall Investments Limited.

Japan

In March 1991, Fujita Den Trading (then, the master franchise owner of McDonald's in Japan) and Blockbuster Inc entered into a joint venture to established Japan's first Blockbuster Video stores. By October 1992, Fujita and Blockbuster opened 15 stores in the country - four of them next to McDonald's outlets and most being located in the Greater Tokyo Area. Unlike Blockbuster's US stores, each Japanese outlet only occupied about half the floor space at 5,000 square feet due to the country's more limited available real estate.[77][78] By June 1996, 32 stores were in operation with a public aim for 150 by 1998. Blockbuster Japan faced heavy competition from Osaka-based video rental chain, Tsutaya, with its 817 outlets, but the company saw opportunity in the population having high VCR ownership levels (at around 75%), low satellite TV penetration (at around 27%), and well-ordered store layouts (unique for most local video stores).[79] However, Blockbuster's business strategy of "wholesome home entertainment" saw it not stock adult entertainment or extreme horror films where they account for 35% of the Japanese video market. That meant Blockbuster was unable to fit into the Japanese market adequately, and was put at a disadvantage to other businesses selling and renting these movies. In 1999, Blockbuster handed its remaining shares over to Fujita Den Trading and exited the Japanese market.[80]

Peru

Blockbuster announced that it plans to shut down its stores in Peru due to poor revenues, which it blamed on the effect of movie piracy.[81] The company has already closed down its stores in Ecuador, Spain, Portugal and El Salvador.

United Kingdom

In 1989, the company entered the United Kingdom via its purchase of the 875-store Ritz Video chain for $135 million from parent company, Citivision plc. Ritz Video was Europe's largest rental chain, with a 20% share of the UK video market and annual sales of about $150 million. The first re-branded Blockbuster outlet opened on Walworth Road, South London, that same year.[82][83] By November 1991, Blockbuster UK converted 30 stores to its brand.

At the start of 2013 the company had 528 locations in the UK. On January 16, 2013, Blockbuster placed its UK subsidiaries in administration, putting over 4,000 jobs at risk. Stores outside the UK are not affected by the administration and continue to trade as normal. On February 1, 2013, a large number of Blockbuster stores in the UK were closed and the UK business was purchased out of administration by restructuring firm Gordon Brothers Europe on March 23, 2013.[84] Blockbuster UK now trades as TS Operations Ltd with only 264 branches retained. On October 29, 2013, Blockbuster UK entered administration for a second time.[85]

Online rentals

United States

In August 2004, Blockbuster introduced a DVD-by-mail service in the U.S. to compete with the established market leader, Netflix.[86]

Blockbuster's U.S. online operation started with around 10 warehouses; further expansions every year brought that number to 41, plus more than 1400 stores in the Blockbuster Online network. Most Blockbuster independent franchises did not honor the Total Access program. The company had 1.5 million subscribers at the end of the third quarter of 2006.[87] Blockbuster's move to follow the business pattern with its online rentals as was established by Netflix prompted Netflix to sue Blockbuster for patent infringement. Blockbuster counter sued with a counterclaim alleging deceptive practices with its patent which it alleged was designed to maintain an illegal monopoly. The suits were eventually settled, and while the terms were not disclosed it was later reported that Netflix recorded a settlement payment from Blockbuster of $4.1 million in the second quarter of 2007.[88]

Blockbuster offered several online movie rental plans. In some cities customers could add games to their movie rental queue as if they were included in their plan, but game rentals resulted in a separate additional fee which was not displayed or charged until the end of the billing cycle.[89] Until July 26, 2007, Blockbuster offered and advertised unlimited free in-store exchanges of online rentals with all plans. Since then there were several changes back and forth with regard to this policy; as of March 2010 customers were allowed a limited number of in-store exchanges.

At the end of 2006, Blockbuster Total Access had 2.2 million customers, exceeding their original goal of 2 million, according to its website.[90] 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.[91] By 2009, however, the company was declining to provide figures when asked by the Wall Street Journal.[92]

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.[93]

On August 6, 2010, Blockbuster By Mail subscribers gained access to Blockbuster's library of console games, in addition to movies and television shows.

On March 31, 2012, Blockbuster On Demand removed support from set-top box media players, including Vudu, WDTV, and Roku. Supported devices now only include computers, Blu-ray players, select television sets and cellular phones.[94]

On February 26, 2013, Roku Inc. announced that Blockbuster On Demand was being launched on Roku's channel store. Supported devices now include computers, Blu-ray players, select television sets, cellular phones and at least the Roku set-top box.[95]

United Kingdom

Blockbuster UK's DVD-by-mail service began in October 2002 and was titled "Pay Per Rent".[87][96] Rentals cost £3.50 to £4.50 and lasted for five nights, usually from Monday to Friday due to the postal service. Late fees of £0.70 to £0.90 per disc applied if a disc was not returned on time.[97]

In May 2004, Blockbuster also introduced a conventional online subscription service. The unlimited three-disc plan costs £14.99/month but does not allow in-store exchange, contrary to the US service. Partial support for in-store exchange would not be added until April 2005 with the launch of an "OnlineXtra" service. This service costed £2 per month, required an online subscription to a disc plan and added two extra discs sent by mail. The OnlineXtra discs could be exchanged in store, but the non-OnlineXtra discs could not. The program was discontinued in 2006 with no grandfathering, but an in-store-only variant of it resurfaced in early 2008.[98] A "Click & Collect" service launched in September 2010 allows the reservation of Blockbuster movies in store, but the store's regular rental fees applied until the company added in-store exchanged in May 2012.[99][100] Support for game reservations was added in November 2011.[101]

The website for Blockbuster UK was overhauled in 2008 with an online store, a retail store stock checker, improved search functionality and a critically acclaimed layout.[102] In-store pickup and exclusive titled were added in 2009. Some of the titles which had an exclusivity period at Blockbuster include Gran Torino, Changeling, Taken and Knowing. Additionally, online rental downloads of Universal Pictures in the UK remains exclusive to Blockbuster. This provides an advantage to the rental company compared to its competitors HMV, Play and LoveFilm.[102]

In January 2010, Blockbuster UK launched an online blog.[103] Improved search algorithms, product pages and social network links were added to the site in April 2010.[104] Blockbuster UK aired a monthly BB Insider online video show from May 2010 to January 2011[105] and launched an iPhone App in September 2010.[106] Throughout the year 2011, Blockbuster UK announced several price cuts along with a new Blockbuster loyalty card program.[107] These price drops were followed by a price drop of the Blockbuster UK online pay per rent service.[108] Although some Blockbuster UK advertisements claim that the company no longer charges late fees, the fine print and/or voiceover clarifies that rentals will be charged an extra pound for every additional night.[109] A "Top Ticket" feature was added in April 2011, allowing monthly subscription customers to rent an additional movie at no extra charge and to receive it before other movies they request.[110][111] Support for online sales of used movie and game discs was added in July 2011.[112] The Blockbuster UK website was enhanced in September 2011.[113] During the following month, a new TV section was added to the website.[114]

3D Blu-rays were added to Blockbuster UK in February 2012.[115] In May 2012, Blockbuster UK partnered with IGN to launch a new Blockbuster VIP Gamer loyalty program.[116]

On 16 January 2013, Blockbuster UK entered administration, appointing Deloitte as company administrators, casting doubt over the future of their 528 stores in the country.[117] An announcement was then made by Deloitte that 160 UK stores would close. On 13 February 2013 Deloitte announced a further 164 stores closures, leaving 204 stores trading in the UK. The business was sold to restructuring firm Gordon Brothers Europe on March 23, 2013.[84]

Brazil

In January 2006, Blockbuster Brazil also introduced an online rental service now featuring both DVD and Blu-ray plans. There were four Block plans available with prices ranging from R$34.90 to R$79.90. The 3-disc plan with unlimited exchanges was R$49.90/month. Unlike the US service, there was no in-store disk exchange.[118]

Movielink acquisition

On August 8, 2007, Blockbuster announced that it has reached an agreement to purchase Movielink. According to the 8-K filing by Blockbuster, the total purchase price was $6.6 million.

Controversy

Misleading advertising

In 2005, Blockbuster launched a marketing campaign describing changes in its late fees policy and offering "No Late Fees" on rentals. The program sparked investigations and charges of misrepresentation in 48 states and the District of Columbia, as state attorneys general including Bill Lockyer of California, Greg Abbott of Texas, and Eliot Spitzer of New York argued that customers were being automatically charged the full purchase price of late rentals and a restocking fee for rentals returned after 30 days. In a settlement, Blockbuster agreed to reimburse the states the cost of their investigation, clarify communication to customers on the terms of the program and offer reimbursement to customers charged fees prior to the clarification. New Jersey filed a separate lawsuit and was not a party to the settlement.[119][120][121][122][123]

The 2005 controversy came after a related lawsuit settled in 2002 in Texas. That lawsuit, alleging exorbitant late fees, led the company to pay $9.25 million in attorney fees and offer $450 million in late fee refund coupons (which were rent-one get-one-free coupons, and thus required the customer to make an initial expenditure). The company estimated that the coupons would ultimately cost about $45 million depending on the redemption rate; an attorney for the plaintiffs estimated the final cost at closer to $100 million at a redemption rate of about 20% (calculated based on a similar case in Michigan).[124][125]

Such corrections were also sent to international stores such as those in Canada to prevent further lawsuits.

Blockbuster reintroduced late fees in the United States in 2010 under the name of "Additional Daily Rates." With this pricing scheme, rentals were once again limited to a certain number of days and accrued pay-per-day rates after the days allocated are exceeded.

Advertising

Slogans

  • "Wow! What a Difference!" (1990s)
  • "Make It a Blockbuster Night" (1990s)
  • "Bringing Entertainment Home" (1990s)
  • "Go Home Happy" (1990s)
  • "Bring The Good Times Home" (1990s)
  • "The New Blockbuster" (2005)
  • "America's No. 1 Home Entertainment store" (current)
  • "There's more inside" (current)
  • "The Movie Store at Your Door" (current, Blockbuster Online)[126]

Super Bowl

One of Blockbuster's most well known advertising campaigns was launched during the 2002 Super Bowl. It starred the voices of James 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.

See also

References

External links

  • Official mobile site
  • Crocker, Ronnie and Purva Patel. "Houston Chronicle. September 24, 2010.
  • spoof of a Blockbuster Store becoming an historical experience 'museum'

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