Blockbuster Case Analsys By Dare Devil Consulting
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Transcript of Blockbuster Case Analsys By Dare Devil Consulting
- for Blockbuster Inc.
Team Members:
Gopi Shankavaram
Prem Brahmandam
Ramamoorthy Narayanan
Nagesh Kambala
Situation AnalysisCurrent Situation (Blockbuster)
Market leader with 35% market share. 5000 stores (Video Rental), 30 K employees and $5.2 B revenue.
Huge say and large contracts with Studios.
Expanding into Mail-order , Vending , online streaming businesses,
Current Trends
Declining revenues, increasing operating loses.
Increasing Corporate debt, low working capital for expansion etc.
Netflix and Red box are disruptively stealing market share.
Challenges
Old fashioned employment practices, lack of innovation, low integration.
Ineffective inventory management in stores.
Mail order, vending, online content are cannibalizing in-store rentals.
Key Question: How should Blockbuster turn around?(Our vision for Blockbuster in 3-5 years).
In-Store Rental - Challenges• Stores not integrated, low convenience.• Huge fixed costs.How can we improve profitability in this model?
Mail Order - Challenges• Not very efficient in operations.• Inventory transfer problems.Can we sustain competition from Netflix?
Vending Machine:• Not integrated, mainly silos• high overhead costs.Can we compete with Redbox’s Low cost model?
On Demand:• Late entrants.• Not efficient technology.Can we disrupt?
Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010
Recommendation: Our vision of Blockbuster in 3-5 years
“Seamless integration” among all distribution channels.
customer
How to Achieve this?
Domestic Market Size (Movie & Video distribution)
2009:$24 Billion 2014E:$26 Billion
Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010
Industry Trends
Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010
Blockbuster’s Strategic Direction: Multi-Channel Access Business Model
Strategic Plan – Phase 1Significantly reduce store presence.
Current debt levels are unsustainable and store operations form a major cost.
Funnel the freed capital into business consolidation.
Integrate the current distribution channels.
Continue to build key partnerships with movie studios and game makers. Enhance repository of movies and
games.
Online Rentals is still a growth business. Leverage breadth and depth of movie
collection for mail-order business.
Expand rentals via Vending Machines Partner with nationwide chains (e.g. Target) No subscription-model
Focus on video game rentals Increase in proliferation of game
devices (Wii, Xbox, Playstation)
Strategy Plan – Phase 2Aggressively move
toward digital content offerings Movie on-demand Increased usage
from PCs, smartphones, PC/TV convergence
ConclusionsMovie Gallery is not an attractive acquisition
Store model does not align with our proposed strategic plan for Blockbuster
Current debt load and inability to finance does not favor an acquisition.
Pursue a phased multi-channel business consolidation Significantly reduce store footprint Resulting cost savings to be plowed back into
key growth areas (DVD online rentals, vending machines, VOD)
Q&A
Appendix Slides
Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010
Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010