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