Blockbuster
Past 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
February 1987, August 2004,
Blockbuster goes Blockbuster Online
public Introduced
Early 1990's November 1, 2006
October 19, 1998 Netflix is
Acquires U.K.'s Rizv Blockbuster Total
1985 Opened established
Video Access Introduced
first store
1985 1990 1995 2000 2005 2010
August 25, 1986 1994, Viacom Janurary 1, 2005
Opened first purchases Elimination of Late Fees
franschise store Blockbuster
in San Antonio
June 1987
Blockbuster acquires
Movies to Go
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
