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A New Business Plan
Scene Selection
Company Background
Industry
Competition
Marketing
Structure & Management
Financial Struggle
Recommendation
Risks & Benefits
Directed by: Mandy Sherman, Ryan Dangaran, Roy
Matsunaga,
Angela Bettenburg, Kyle Callahan, Brian DeHaan
Company Background
Founded in 1985 by David Cook
• Publicly traded after 1986 under the name Blockbuster Entertainment
Acquired by Viacom in 1993 at a $8.4 billion price tag
• Split from Viacom and has since been known as Blockbuster, Inc. 2004
Currently under the management of CEO Jim Keyes and 4 prominent executive VPs
Industry
Video Rental Market
• Traditional brick and mortar dominated by Blockbuster
• By-mail service revolutionized by Netflix
• Distinct competitive advantages
• Focus on convenience and low cost
Lack of Growth in Physical Film Market
• Segment contains In-store, Vending, Mail subscription
• Vending has grown, but only represents 3.3% of Industry revenue
2%
Industry
Shift to Digital Media
• Cable and satellite video-on-demand
• Internet downloadable content
• Streaming video
19%
Competition
Highly Concentrated
Capital Intensive
Threat of Substitutes
Commodity Good
Market Share
Blockbuster
Netflix
MovieGallery
Independent/Other
44%
13%
20%
23%
Competition
Entry Barriers
Exit Barriers
Intensity of Rivalry
HIGH HIGH HIGH
Marketing Customers
Impulse
• Infrequent
• In-store
• Low brand loyalty
• Low price sensitivity
• Advantage with convenient locations
In-Store Only Total Access
• Lower convenience-sensitivity
• Higher price-sensitivity
• Loyal to traditional renting
Online Total Access
• Tech proficient
• Convenience-sensitive
• Expect low cost
Marketing
Blockbuster Netflix Redbox
Impulse
Rentals
$4.99 / new releases
$1 / non-new releases
None $1 / rental
Online
Subscriptions
$9.99-$19.99 $4.99-$16.99 None
In-Store
Subscriptions
$21.99
unlimited
None None
Competitor Pricing
Product Life Cycle
Marketing
•Distribution System
•Advertising and Promotionas a percentage of sales
39 online-distribution centers
Reach 90% customers in 1 day
Netflix Blockbuster Movie Gallery
Management
•Centralized
•Bureaucratic
•Elaboration Stage
Organization
•Mature industry
•Functional-mechanistic
structure
•Hierarchical
Structure James W. Keyes
Chairman of the
Board & CEO
Regional Manager
Store Manger 1
Store Manger 2
Regional Manager
Store Manger 3
Store Manger 4
Regional Manager
Store Manager 5
Store Manger 6
Eric H. Peterson
Executive VP/General Counsel and Secretary
Thomas M. Casey
Executive VP & CFO
Kevin Lewis
Senior VP, Digital Entertainment
Jeffery Calman
VP of New Media and Studio Relations
Compensation & Control
Cash
Pay-for-performance bonuses
Stock Options
Compensation
Output controls
Boundary controls
Control
Financials
Current Ratio
Quick Ratio
Blockbuster Industry Avg.
Cost of Goods SoldAs percentage of sales
2007 2004
Financials
Sales
Cash (10/5/08)
General &
Administrative
Current Stock Price (3/9/09)
Market Cap
Overhead declining as
percentage of sales
Recommendations
Allow leases to expire on poor performing stores
• 6% Store closure rate in 2008 has not significantly affected store sales
Restructure into Matrix style
• New partnership with Sonic Solutions
Increase retail merchandise at remaining stores
• 4th quarter non-movie sales 36.5%
Recommendations
Video Game Industry
• 19% growth in 2007
Operating Plan
• Leveraging Sonic Solutions technologies to create direct-to-console game rentals
Marketing Plan
• Incorporate into Total Access offering
Direct Video Game Downloads
Recommendations
Benefits for
• Blockbuster’s strong supplier relationship
• Improved variety of films
Benefits of
• Leverage existing infrastructure
• Reduce need for capital expenditure
Advantage over Netflix
• First-Mover advantage
On-Demand Blockbuster Channel
Risks
• Projects in Growth stage Uncertainty
• Competition Potential loss of first mover advantage
• Debt to Equity Ratio
• Lack of funding Liquidate & Close
Benefits
Increased Liquidity
Improve customer satisfaction
Differentiate from competitors
Retain existing customers
Capture new customers
Credits
Angela……………Stage
Director
Ryan……………………Film
Editor
Mandy..........Script
Supervisor
Roy……………………..…Pro
ducer
Kyle…………..Cinematograp
her
Brian……………….…………
Gaffer
Questions