BBI Overview

With its roots grounded in Dallas, Texas, the world’s largest chain of DVD, Blu-ray Disc, and video game rental stores, Blockbuster Inc. (BBI) began its existence 1985 as the brainchild of David Cook, who worked endlessly at growing the business in order to take it public.

Cook, who owned Cook Data Services Inc., supplied the tools and computer software services to the Texas oil and gas industry in 1982. When the oil and gas industry went bankrupt in Texas, Cook was in search of a new revenue source. It was actually his wife that suggested that Cook enter the video rental business.

In October 1985, Cook opened the first Blockbuster with more than 8,000 tapes spanning over 6,500 titles. A key selling point to the new business was the actual display of movies available for rental, seeing how other competitors were keeping many of their tapes behind the counter to discourage theft.

The first store became an instant success, as customers were flocking to the stores to see their favorite movies. The demand was much more than the Cook’s could have ever imagined. In 1986, Cook opened three additional stores to keep up with demand.

Shortly after breaking ground in the company’s business practice, Blockbuster caught the attention of Scott Beck, a student in New York, who would seek the guidance of John Melk, then an executive with Waste Management Inc. (WMI). The two, along with business associate and former owner of the Miami Dolphins, Wayne Huizenga, pondered the notion of buying a franchise, despite the concerns among them about the video rental industry.

It did not take long for the group of investors to make headway with the business. As the company began to grow, the investors were buying up every franchise of Blockbuster, while opening new stores on an average of one per day, during the height of the company’s success. In the course of a year, from 1986 to 1987, Blockbuster’s sales jumped from $7.4 million to more than $43 million.

As Blockbuster’s popularity began to grow, the company became a multi-billion dollar company. By June 1987, Blockbuster owned 15 stores and franchised another 20 stores. By this time, Cook had relinquished one-third of the company’s control to the investment group and would later surrender any future control of the company to the group.

However, Huizenga, who had the overall say in the company’s business operations, would keep many of the policies in place that Cook had founded the company on. These would include store hours remaining open from 10:00 a.m. to midnight every day, a three-day rental policy, which encouraged customers to rent more than one tape per visit and a broad selection of movie titles.

With Huizenga in control, the company continued to expand, buying up smaller rivals along the way. In 1988, Blockbuster purchased several video competitors while opening more than 200 stores that year. By the end of the year, Blockbuster was now the largest video retail chain in North America with more than 410 stores.

Blockbuster’s surge into mainstream America led the company to broaden their presence overseas. The company already had stores in the U.K. and Japan, but needed to increase viable store locations. The company thus moved into more markets within Europe, Australia, Canada, Mexico and Latin America.

Heading into the new millennium, the company offers movies and video games for in-store, rental, sale and trade, along with operating an online service that offers rental and sale of movies by mail, as well as digital delivery through blockbuster.com.

Through the company’s internet-based subscription service, blockbuster.com allows patrons to rent DVDs by mail, offering substantially more titles than its brick-and-mortar stores. Another advance within the company came in June 1997, when Blockbuster announced that the company would resort to Blu-Ray disk formatting over its competing HD DVD format.

Additionally, in November 2008, the company premiered its Blockbuster OnDemand service with the 2Wire MediaPoint digital media player. The new service is an on-demand video solution that gives customers access through their television sets to the company’s on-demand content.

Today, Blockbuster operates nearly 7,400 stores worldwide with an enterprise value of more than $1 billion. The company competes with such well-known companies as Wal-Mart (WMT), Best Buy (BBY), Target (TGT), GameStop (GME), Movie Gallery (MVGR.PK), Hastings Entertainment Inc. (HAST), Netflix (NFLX) and Redbox.

By BetterTrades