Blockbuster (retailer)
Blockbuster or Blockbuster Video was an American multimedia brand which was founded by David Cook in 1985 as a single home video rental shop, but later became a public store chain featuring video game rentals, DVD-by-mail, streaming, video on demand, and cinema theater. The company expanded internationally throughout the 1990s. At its peak in 2004, Blockbuster employed 84,300 people worldwide and operated 9,094 stores.
Poor leadership and the impact of the Great Recession were major factors leading to Blockbuster's decline, as was the growing competition from Netflix's mail-order service, video on demand, and Redbox automated kiosks. Significant loss of revenue occurred during the late 2000s, and the company filed for bankruptcy protection in 2010. The next year, its remaining 1,700 stores were bought by satellite television provider Dish Network; by 2014, the last 300 company-owned stores were closed.
Although corporate support for the brand ended, Dish retained a small number of franchise agreements, enabling some privately owned franchises to remain open. Following a series of further closures in 2019, only one franchised store remains open, located in Bend, Oregon. As of 2025, the company remains in existence under the name BB Liquidating, Inc., which gained notoriety in the GameStop short squeeze in 2021.
History
1985–1996: Founding and early growth
Blockbuster's beginnings can be traced back to another company, Cook Data Services, founded by David Cook in 1978. The company's primary goal was to supply software services to the oil and gas industries throughout Texas, but it was very unsuccessful. Sandy Cook, David's wife, wanted to get into the video business, and her husband would soon study the industry and future prospects. Using profit he made from the sale of David P. Cook & Associates, the subsidiary of his company, he decided to buy into a video store franchise in Dallas known as Video Works. When Video Works would not allow him to decorate the interior of his store with a blue-and-yellow design, he departed the franchise and opened the first Blockbuster Video in 1985 under his own company Blockbuster Video Inc. When he realized the potential in video rentals, Cook abandoned the oil industry and began franchising the Blockbuster store.The first Blockbuster store opened on October 19, 1985, in Dallas, Texas, with an inventory of 8,000 VHS and 2,000 Beta tapes. The chain's name is derived from the term blockbuster, a Hollywood term for a successful film. Cook's experience with managing huge databases proved helpful in driving innovation within the industry. Following early success from the company's first stores, Cook built a $6-million warehouse in Garland, Texas, to help sustain and support future growth that allowed new stores to open quickly. Blockbuster would often custom-tailor a store's inventory to its neighborhood, based on local demographics.
In 1987, Waste Management co-founder Wayne Huizenga, who originally had reservations about entering the video rental industry, agreed to acquire several Blockbuster stores. At that time, there were 19 stores, attracting Huizenga's associate John Melk's attention due to its efficiency, family-friendly no-pornography image and business model. Huizenga and Melk utilized techniques from their waste business and Ray Kroc's model of expansion to rapidly expand Blockbuster, and soon they were opening a new store every 24 hours. They took over many of the existing Blockbuster franchise stores, and Huizenga spent much of the late 1980s acquiring several of Blockbuster's rivals, including Major Video. In 1989, Nintendo attempted to halt Blockbuster's ability to rent video games, filing multiple lawsuits and lobbying the U.S. Congress to ban the practice. Nintendo ultimately lost the battle, which paved the way for future video game rental.
Blockbuster sponsored the Blockbuster Bowl in American football, which began in 1990 and was played at Joe Robbie Stadium outside Miami. The first three editions were played under that name before Blockbuster withdrew its sponsorship.
In 1990, Blockbuster bought mid-Atlantic rival Erol's which had more than 250 stores. In 1992, Blockbuster acquired the Sound Warehouse and Music Plus music retail chains and created Blockbuster Music. In October 1993, Blockbuster took a controlling interest in Spelling Entertainment Group, a media company run by television producer Aaron Spelling. Blockbuster purchased Super Club Retail Entertainment Corp. on November 22, 1993, from Philips Electronics, N.V. for 5.2 million shares of Blockbuster stock. This brought approximately 270 Record Bar, Tracks, Turtles and Rhythm and Views music stores and approximately 160 video retail superstores into the corporation. It also owned 35% of Republic Pictures; that company merged with Spelling in April 1994.
Blockbuster became a multibillion-dollar company, but Huizenga was worried about how new technology could threaten their business, such as video on demand and the growth of cable television. In 1991, just three days after Time Warner had announced it would upgrade its cable system, Blockbuster's shares dropped more than 10 percent. In 1993, he made an attempt to expand into other areas by investing in Viacom. Huizenga also considered buying a cable company, but this was unknown territory for Blockbuster and he decided not to take the risk. He also had the idea of a 2,500-acre Blockbuster sports and amusement park in Florida, something Blockbuster was still considering as late as August 1994. Unable to come up with a proper solution about how to face the growing threats to the traditional videostore, he made the decision to sell Blockbuster to Viacom and pull out. Viacom acquired Blockbuster in 1994 for $8.4 billion to help finance its bid for Paramount in the bidding war with QVC Network Inc. Blockbuster's stock trade had been dropping steadily the months before the merger, with a small rise after the deal was announced, and by the latter part of the decade, its worth was estimated to have fallen to just $4.6 billion.
The Blockbuster Block Party concept was test-marketed in Albuquerque, New Mexico, and Indianapolis, Indiana, in 1994. It was an "entertainment complex" aimed at adults, containing eight themed areas housing a restaurant, games, laser tag arena, and motion simulator rides, and was housed in a windowless building the size of a city block.
The original Blockbuster company, Blockbuster Video Inc., was merged into the parent company Blockbuster Entertainment Inc. which had earlier replaced the Blockbuster Entertainment Company. In 1996, Blockbuster Entertainment Inc. merged into a new Blockbuster Entertainment Corporation and the retail stores, then called Blockbuster Video, were renamed Blockbuster. The logo changed slightly, but retained the ITC Machine font. In November 1996 Blockbuster confirmed that it was moving its headquarters from Fort Lauderdale, Florida, to the Renaissance Tower in downtown Dallas. Most of the workers at the Florida headquarters did not want to relocate, so Blockbuster planned to hire around 500 to 600 new employees for its Dallas headquarters. The company had offered various relocation packages to all of its Fort Lauderdale staff. The second Blockbuster Entertainment Corporation was later merged into Blockbuster, Inc.
1997–2006: Expansions, acquisitions, and peak
In June 1997, Taco Bell president John Antioco resigned from the company to become CEO of Blockbuster. Also that year, Warner Bros. offered Antioco an exclusive rental deal, seeing as DVDs were emerging as the new home video medium. Blockbuster was to have rights to rent new DVD releases for a period of time before they went on sale to the general public. The studio was to receive 40% of rental revenues in return, which was the same deal already in place for VHS rentals. Blockbuster turned the offer down, and the studio responded by lowering its DVD wholesale price in order to compete with the rental industry. Walmart seized the opportunity and in a few years surpassed Blockbuster as the studios' single largest source of revenue. Other mass retailers soon followed suit, selling DVDs below wholesale price as a loss leader in hopes of drawing more customers to their stores and selling them more profitable items. Unable to match prices, Blockbuster's business model was severely affected.In 1998, Blockbuster created DEJ Productions, which acquired 225 films primarily to provide exclusive content to its Blockbuster stores prior to being sold off to First Look Studios in 2005.
In late 1998, Blockbuster launched a loyalty program called Blockbuster Rewards that allowed customers to earn free rentals, including one older title each month from the category of Blockbuster Favorites. After a 1998 test launch, the chain went nationwide with the program in 1999.
In August the same year, Viacom sold the Blockbuster Music chain to Wherehouse Entertainment, which was subsequently purchased by Trans World Entertainment in 2003.
In mid-2000, the company partnered with Enron in an attempt to create a video-on-demand service. The agreement was supposed to last for 20 years; however, Enron terminated the deal in March 2001 over fears that Blockbuster would not be able to provide sufficient films for the service. Also in 2000, Blockbuster turned down a chance to purchase the fledgling Netflix for $50 million.
In 2002, Blockbuster acquired Movie Trading Company, a Dallas chain that buys, sells, and trades movies and games, to study potential business models for DVD and game trading. Also that year, it acquired Gamestation, a 64-store UK computer and console games retailer chain, and purchased DVD Rental Central for $1 million, an Arizona father-and-son online DVD-rental company with about ten thousand subscribers. DVD Rental Central would eventually become Blockbuster Online.
On or around October 14, 2004, Blockbuster was spun-off from Viacom. Online DVD subscriptions were introduced on Blockbuster.com, also known as Blockbuster Online. Blockbuster also rolled out its "Game Rush" store-in-store concept to approximately 450 domestic company-operated stores. Blockbuster began game and DVD trading in selected U.S. stores.
At its peak in 2004, Blockbuster had more than 9,000 stores worldwide. In December 2004, Blockbuster announced its intention to pursue a hostile takeover of Hollywood Video, its major U.S. competitor. After several extensions of the tender offer, Blockbuster withdrew due to FTC opposition. To counter the Blockbuster offer, Hollywood Video agreed to a buyout in January 2005 by a smaller competitor, the Dothan, Alabama-based Movie Gallery. Since then, Movie Gallery has filed for bankruptcy twice and its entire chain of stores has been liquidated.
In May 2005, financier Carl Icahn waged a successful proxy fight to add himself and two other members to the board. Icahn accused Blockbuster of overpaying chairman and CEO John F. Antioco, who had served in that capacity since 1997, receiving $51.6 million in compensation for 2004. Icahn was also at odds with Antioco on how to revive profit at Blockbuster. Antioco scrapped late fees in January, started an internet service, and decided to keep the company independent, while Icahn wanted to sell out to a private equity firm. Also in 2005, Blockbuster began a campaign promoting its "No more late fees" policy. The campaign proved controversial, with Associated Press reporting that the new policy actually charged users the full price of the movie or game after eight days which they could cancel by returning the product in question and paying a fee. More than 40 states filed suit against the company for false advertising. Blockbuster later settled the suit by agreeing to refunds, as well as promising to better explain the policy.
Vintage Stock acquired the Movie Trading Company name from Blockbuster in 2006, and continues to use the name for Dallas-area stores.