BLOCKBUSTERPrimetime!

Section 503-Group 7

Walid Abo AlhijaaBrent Hamilton

Behshad NowrooziMira Qutub

Jeremy ShahanJoshua Whitmore

Executive Summary

In October 1985, an entertainment giant was born and Blockbuster with its iconic torn-

ticket logo and bold blue and yellow scheme would change the video rental business. Founded

upon a site at Skillman and Northwest Highway in Dallas, in a freestanding section of a shopping

strip, Cook Data Services began a metamorphosis into a video rental conglomerate. The seeds for

the company's later diversification were sown early: when the company changed its name in May

1986, Cook deliberately chose Blockbuster Entertainment Corp. rather than the more limiting

Blockbuster Videos, because he could see the name could work for a host of company

subsidiaries.

Blockbuster would soon gain notoriety because of its vast selection, convenient checkout

and three-day rentals. Some industry innovations that Blockbuster got credit for--like the "live"

display meaning the movies were actually on the shelves--were simply a matter of practicality.

There was simply no way to service a store with 8,000 videos in the old method of customers

having to bring empty boxes to clerks to see if the movies were in stock. And unlike the industry

norm, Blockbuster didn't charge a membership fee. Cook didn't want customers to not come to

the store because they felt they had "invested" with another chain. Blockbuster's policy against

renting X-rated films would garner lots of positive publicity and was later parlayed into its

"America's Family Video Store" slogan. Other innovations, like the store's computer system,

used a bar code scanner to read key data from each rental tape and from the member's card.

These innovations were fundamental to its initial success.

With approximately 27 percent of the U.S. market share, Blockbuster operates about

6,500 video stores, serving more than 87 million customers in the United States, its territories,

and 25 other nations. Our presence within the entertainment market is undeniable, but as linear

TV is viewed less, the spectrum it now uses on cable, fiber, and over-the-air will be reallocated

to expanding Internet data transmission threatening our way of operating for twenty years. Thus

implementing future investments in downloading and streaming logistics and the necessary

technology, to cater to this shift, will allow us to stay ahead-of-the-curve and make our content

more accessible than ever. We will work in conjunction with cable and satellite providers, as

well as technology manufacture giants to ensure our product has the largest outreach possible.

That is where Blockbuster Primetime comes into play. Blockbuster Primetime is our all-in-one

approach to make movies and television shows at your fingertips. Our tech-savvy, price sensitive

consumers will have access to our thousands of titles simply by launching a FREE application

through hundreds of supported devices.

The Challenge

With over a billion hours a day of linear TV being consumed we anticipate as technology

improves and evolves exponentially, internet speeds will continue to become faster, ushering in a

digital era that will make the more traditional rental business models, involving physical discs,

obsolete. The brick and mortar approach, that has been successful, in the past, will need to

change. Our challenge is how to adapt to this. This transformation, in our evaluation, will result

in a completely new consumer focus, centered on convenience. This focus on immediate

accessibility will shape the future of watching for customers. Taking appropriate precautions,

with implementing our Blockbuster Primetime initiative are conducive to large growth and future

sustainability of our market.

Situational Analysis

Company

Blockbuster, originally a small flashy video rental chain formed in Florida 1985, is a

company who has destroyed its competitors over a 2-decade period. In 1987, businessman

Wayne Huizenga bought the company and turned Blockbuster Inc. into the company it is today.

Currently, Blockbuster has 7,600 stores in the United States that are providers of home movie

rental, retail movie, and game entertainment.

Blockbuster’s core competency is providing a massive variety of movie and game rentals

to its stores all across the United States and the world. New Releases of the year’s hottest

Hollywood hits are rentable at Blockbuster at a lower cost than purchasing them at retail stores.

Customers

Blockbusters current target markets consist of people all ages seeking home

entertainment. Blockbusters immense inventory of old and newly released movies enable them to

draw movie enthusiasts of all types. Blockbuster is able to attract all ages and gender by dividing

its movie selection into multiple sections, such as, but not limited to classic, new release,

children, drama, and romance.

Blockbuster has recently started focusing a bit more on video games with the addition of

“Game Stop” to their stores, which targets gamers and teens. Although Blockbuster has offered

game rentals for quite some time now, “Game Stop” specializes in video games. A customer can

walk in to game stop buy, trade, or sell games and gaming equipment. In addition to putting

“Game Stop” in their stores, Blockbuster has also launched “Game Pass” an online video game

rental program.

Competitors

Blockbuster is currently in control of its market with companies like Wal-Mart

withdrawing its home rental section in the 1990’s, due to the decision that video rentals was not a

part of their company’s core. Other companies like Hollywood Video formed in 1988 were just

unable to keep up with the almost exponential growth of Blockbuster. Still there are some major

competitors that Blockbuster should watch out for, such as Netflix and Redbox.

Netflix a company formed in 1997 took advantage of lightweight dvd’s and created a

mail-order rental service. This concept for customers is a very convenient mode of getting their

movies without ever leaving their home. The company is a much simpler business plan

compared to Blockbuster’s, instead of manning multiple stores with employees and distributing

the videos to each store, the customer can directly rent from their warehouse. This enables direct

delivery to the customers without having to pay for leasing multiple stores in thousands of

locations and reduces dramatically the number of employees required to run the business. Which

in the end allows Netflix to charge lower prices for a rental then blockbuster.

Another competitor that followed a similar business format as Netflix, was Coinstar’s

new innovation in video movie rentals called Redbox. Redbox’s plan is to distribute movie

rentals out of kiosks placed at fast-food chains and grocery stores all over the United States.

Redbox is able to charge $1 dollar a movie rental by eliminating the need for multiple

storefronts. Initially in 2002, Redbox had 11 kiosks in the Washington metropolitan area and by

2004 Redbox had over 100 hundred kiosks in the Denver area and many hundred more in other

areas, expanding its area of operation.

Context

The current Technological environment could prove to be a huge challenge for

Blockbuster to overcome. There are currently over 364 million people in the world who have

Internet and the number is steadily growing each day. This could become a huge problem for

Blockbuster, because of live streaming of movies over the Internet. People will no longer have to

leave their houses to rent a movie; they can just sit at home on their computer find a movie and

download it or stream it.

SWOT Analysis

Strengths:

Globally known brand name

Virtual monopoly in the rental

market

Extremely large selection of

movies

High quantities per title

Convenient avenue to watch

media, play games, or listen to

music

Weaknesses:

Increased overhead due to

growth

High prices due to lack of

competition

Increased waiting times at peak

hours of operation

New releases often went out of

stock during initial release

Opportunities:

Purchase Netflix to offer media

by mail

Research ways to enter into other

media markets to develop a

stronger business model

Segment distribution evenly

throughout the US

Develop new deals with studios to

help bolster media offerings or

even lower prices

Threats :

Economic downturn

Distribution Center disaster

Technological advances

Competition

Blockbuster Segmentation Strategy

Demographic Segmentation by Age:

From 13 – 19: (25 % of the market) it consists of teenagers, most of them whom are

hardcore gamers. The teen’s market is a dynamic and extremely competitive

environment. They always look for the newest and latest games to buy on time when the

game is released. In addition, they would also be interested in some TV shows and music.

Stores who offer fun and unique products for a reasonable price usually attract teen

consumers. One of the effective ways where we can reach teens is through mobile phones

via text messages and emails by sending coupons and compatible affordable offers.

From 20 – 29: (55% of the market) it consists of young couples, or young small families

with their kids. This market is huge due to the variety of people we can target in this

category. People in this category always look for movies most of the time. Some

consumers in this age will still want to go back in time to the teenage stage and play one

or a couple of their favorite video games in their free time. While others who are starting

families will rent movies to spend quality time with their kids or rent games to entertain

them. We can reach these consumers via many ways such as online marketing, which it is

expected to be the most effective way to approach them.

30 and up: (20% of the market) it consists of professional, old, mature people. This

market is limited due to the old age but at the same time it might increase and improve

the business by targeting their kids and families. Consumers would be mostly interested

in old movies, documentary movies and other options of movies and TV shows. It is

important to satisfy these consumers because they might bring their kids with them and

make the whole family happy providing all kinds of products and services available for

all ages.

Marketing Plan (4P’s)

Product

We will introduce our new product as Blockbuster Primetime; with its proprietary

software infrastructure it will allow customers to stream movies and TV series from the wide

variety of movies incorporated in Blockbuster’s library. It will be licensed to a wide range of

cable providers such as TWC, Verizon, AT&T, etc. Each of these providers will integrate the

software into their receivers, making it an easy process for the customer to rent a movie from the

comfortableness of their own home. With the idea to license this software to cable providers, it

will make our product available to a even more wider range of individuals, including the people

that do not like leaving the house. People are probably wondering what will happen to the actual

Blockbuster stores if we move on to this software approach, and the answer is simple. We will

keep stores open in rural areas, while closing the stores in high volume areas to accommodate to

our new offering. In addition to some store closures, to the stores that remain open the product

selection will be refined to new releases, games and a reduced library of older titles.

Price

As for the price of this new implementation, we estimate that subscriptions would cost

around $9 a month as a price point. With this subscription it will include unlimited SD streaming

throughout the month and HD streaming can be added for an additional $1 a month due to costs

of data load. The payment would be collected by the cable providers allowing seamless billing

for the customer and reduces the company’s costs for handling accounts. With this process

revenue will be split in categories: licensing from cable providers, subscription/membership fees

and existing store memberships.

Promotion

For promotions we will start off with base level promotions, some examples include a

one-month free trial for new customers. This will allow customers to try our product free of

charge and convince them to actually subscribe. For the existing store customers who choose to

transfer to Blockbuster Primetime, they will receive 2 months free. To market our product even

more people who refer friends and family members to switch to our Blockbuster Primetime

program will receive referral discounts. All customers can utilize the store rentals with minimal

added fees. Marketing our product through word of mouth is how we will gain most of our

customers but with the help of cable providers it can help stimulate our advertising reach. We

will also advertise through channels such as television, Internet and radio.

Place

Since our new product is through software there isn’t a particular place to sell the

product, since our product is going to be sold through technologic mediums (T.V, laptop, etc.).

As mentioned before, Blockbuster will provide the program infrastructure to the cable providers,

who will then download the finished software to their receivers remotely. Regardless if the

customer chooses to utilize this service we offer, the software will always be available.

Short Term and Long Term Projections

Short Term

Talking about short-term effects, R&D, equipment and programming will have a large

budget making it expensive to implement. With advertising since it will be a joint effort, many

companies will help contribute to marketing the product. Initially, the beginning expenses will

overwhelm the revenue but only for a short time period. Like all new products, it takes time to

gain revenue and this is the introduction phase, once people gain recognition of the product we

will see profits soar.

Long Term

Projecting long-term effects, increased server space will be required. With the increasing

amount of movies released each year we will have to extend our movie selection while at the

same time maintaining all the movies that are currently in our database. This will need more

storage space, which requires more money. Over time internet speeds will ramp up, meaning

with more time HD quality videos will be easier to provide with faster loading times. As

bandwidth expands, so will the market pool. If this product proves to be successful, there might

be no need to keep actual stores open because most if not all people will move on to the

technological phase of renting movies online/through TV. So long term expectations might

include closing all stores.

Conclusion

In 2004, Blockbuster reached its peak of growth when Blockbuster had up to 60,000

employees and more than 9000 stores! With approximately 27 percent of the U.S. market share,

Blockbuster operated about 6,500 video stores, serving more than 87 million customers in the

United States, its territories, and 25 other nations. In conclusion, Blockbuster Primetime is our

all-in-one approach to make movies and television shows at your fingertips. Our tech-savy, price

sensitive consumers will have access to thousands of titles simply by launching a FREE

application through hundreds of supported devices. We believe we can ressurect Blockbuster and

we think we can top our competition with our new implementation of Blockbuster Primetime.

Appendix

Works Cited

"They Don't Call It Blockbuster For Nothing". Bloomberg Businessweek. 18 October 1992.

Retrieved 25 November 2013

"The Making of a Blockbuster". Bloomberg Businessweek. Retrieved 25 November 2013

"Blockbuster Inc. History". Funding Universe. Retrieved 25 November 2013