Blockbuster Presentation
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Blockbuster was once the dominant video rental company but failed to adapt to changes in technology and consumer preferences. It filed for bankruptcy in 2010. Key factors in its decline included: 1) Failure to innovate and embrace new technologies like online streaming and rentals while competitors like Netflix and Redbox successfully adopted these new models. 2) Unhappy customers due to uncompetitive policies like late fees while Netflix had no late fees and a more convenient subscription model. 3) Heavy debt load from acquisitions and retail expansion made it difficult for Blockbuster to pivot to new business models.
Blockbuster Presentation
- 1. Blockbuster, IncAkente WardTeri GumienyTony MarreroSuzanne Stout
- 2. BusinessSale and rental of:MoviesVideo GamesBrands:BlockbusterXtra-visionGame RushMyQ Logo
- 3. Quik Drop
- 4. MovielinkLocationsHeadquartered in Dallas, TX6,500 stores (as of Jan 10)Over 4,000 throughout the USOver 2,500 in Europe, Latin America, Australia, Canada, Mexico, and Asia
- 5. History (Key Dates)1985-Founded by David Cook1989-First stores outside US1994-Acquired by Viacom1995-Established blockbuster.com1999-Listed on NYSE2004-Viacom spun off 81.5% interest2006-Sued by Netflix2009-Credit rating watch by S&P2010-Recapitalization
- 6. CEO & Key RolesJames W. KeyesCEOOn board since 2007Salary: $1,150,000Image downloaded from: http://images.fastcompany.com/upload/blockbuster-ceo.jpg
- 7. Stock Chart
- 8. Business PerformanceBalance Sheet for Blockbuster and Major Competitors Netflix and Amazon Balance Sheet for Blockbuster and Major Competitors Netflix and Amazon
- 9. Efficiency RatiosNet Income per Employee 11,629Assets/Revenue 0.45Receivables Turnover 41.1Day's Inventory Turnover Ratio 189Inventory Turnover 1.9Inventory/Sales 15.8
- 10. Profitability RatiosReturn on Assets (ROA) -36.3Return on Assets (ROA) - 5YEAR AVRG. -12.1Gross Profit Margin 66.8Gross Profit Margin - 5YEAR AVRG. 66.7Net Profit Margin -13.8Net Profit Margin - 5YEAR AVRG. -5.9Equity Productivity -8.83Return on Equity (ROE) 0.0Return on Equity (ROE) - 5YEAR AVRG. 0.0
- 11. The IncidentFive concepts of systems failures (Beale):Missed Deadlines home delivery& streaming options (Schuster)Unmet Requirements. Changed focus from just rentals (Gandel)Dissatisfied customers. Late fees & lawsuits (Reisinger)Excessive costs retail, mergers, & high debt ratio, distribution costs (Sandoval)Unused Systems relationships with movie industry (Mow) (Gandel)
- 16. Media Around EventDropped from NYSEChapter 11 Bankruptcy ProtectionLost jobsStore closings
- 17. Why Important to Company1985 Blockbuster embraced technology innovation for growth1987 Blockbuster founder sells company and new owner grows business.1994 Huizenga sells Blockbuster, and new owner makes no commitment to technology innovation.1997 Netflix founded embraces technology innovation on continuous basis and gains competitive advantage over Blockbuster.2002 Redbox founded and makes gains with competitive advantage over Blockbuster.Blockbuster looses millions of consumers to competition due to lack of technology innovation, and rigid and inconvenient customer service.
- 18. Aftermath What Happened?Blockbuster hung on to their entrenched business model from 1985.Competition adopted technology innovation to change and grow.Did not monitor their brand or image with consumers.Consumers unsatisfied with service.Filed bankruptcy September 23, 2010.
- 19. What Happened?Competition enters the Market1997 Netflix founded Gandel (2010) Can rent movies without leaving home. No late fees. Subscription model with monthly fee Offered over 100,000 movies from their website (Gandel) Mail-order DVDs Added Internet streaming options Made a commitment to technology innovation.
- 20. Other Competition 2002 Redbox founded- started with 12 kiosks Parekh (2010) - By 2010 over 25,000 red boxy kiosk locations around the country Parekh (2010). - Offers $1.00 & $1.50 DVD overnight rentals. - Rent & return anywhere program. - Known as The perfect in between technology. Orlando Sentinel (2009) - Developed large customer base. - Has 20 million consumer email addresses Parekh (2010) Other competition -- - Amazon, Wal-Mart, Target, iTunes (Apple), YouTube, hulu, Cable Companies
- 21. Expected Impact over Long Term Business TragedyBlockbuster made changes that may be too little, and too late.Consumers have lost confidence in Blockbuster.The market has changed so much that they are unlikely to thrive. Gandel (2010).Their competitors have a huge lead with streaming videos, & kiosks already in place throughout the country.Still have brick and mortar that reduces their profitability.
- 22. Impact on Business By 2009 * Netflix earned $116 million Gandel (2010) * Blockbuster lost $518 million Gandel (2010) * Netflix added 1.16 million subscribers during the 4th quarter of 2009. HD Report (2010) * Redbox generated $343.6 million in DVD revenues via 18,000 kiosks. Grover & Kharif (2009) * DVDs less expensive to purchase from Amazon, Wal-Mart, Target.
- 23. Corrective ActionsRecapitalization to reduce debtClosed StoresIncreasing by-mail serviceLaunched Blockbuster On-DemandMore online download capabilityGrowing kiosk business
- 24. Analysis of Ethical Nature SS
- 25. ReferencesBeale, Ian. (1996, August). Why Information Systems Fail: A Case Study. Retrieved February 5, 2011, from http://findarticles.com/p/articles/mi_m4153/is_n4_v53/ai_18863038/Chabot, J. (2010, March 4). HD Report. Netflix vs. Blockbuster why is Netflix winning? Retrieved February 11, 2011 from http://www.hdreport.com.Gandel, Stephen. (2010, October). How Blockbuster failed at failing. Business Source Premier. Retrieved February 5, 2011, from EbscoHost. Grover, R. & Kharif, O. (2009, August 24). Hollywood vs. Redbox. Business Week 4144, 38. Retrieved February 13, 2011 from EbscoHost.Mow, Doug. (2010, September). Blockbuster Failure- Was it a lack of BPM agility? Retrieved February 5, 2011, from http://www.ebizq.net/blogs/tech_tomorrow/2010/09/blockbuster-failure---was-it-lack-of-bpm-agility.phpOrlando Sentinel. (2009, July 24). Blockbuster Express DVD rental kiosks popping up at Publix to take on Redbox. Retrieved February 11, 2011 from http://OrlandoSentinel.com.Parekh, R. (2010, November 15). Redbox. Advertising Age, 81 (41), 26. Retrieved February 11, 2011 from EbscoHost.com.Reisinger, Don. (2008, February). Why Blockbuster brick-and-mortars will be gone in five years. Retrieved February 5, 2011, from http://news.cnet.com/8301-13506_3-9867493-17.htmlSandoval, Greg. (2010, September) Lessons for cable in Blockbusters demise. Retrieved February 5, 2011, from http://news.cnet.com/8301-31001_3-20017501-261.htmlSchuster, Mike. (2010, April). How Netflix Succeeded where Blockbuster Failed. Retrieved February 5, 2011, from http://finance.yahoo.com/insurance/article/109382/how-netflix-succeeded-where-blockbuster-failed?mod=family-home