Blockbuster Case Analysis

The Life of Blockbuster

History and Background

Blockbuster's origins date back to the mid 1980's when the video cassette recorder (VCR) was the new hype and families all over America were quickly turning to movie rentals as a form of in-home entertainment. David Cook, who previously started David P. Cook and Associates, Inc. to offer consulting and computer services, saw an opening in the quickly expanding movie rental business. Eager to start a business, he jumped in making Blockbuster the Wal-Mart of movie rentals offering a wide variety of movies to customers in a family environment with standout buildings and bright lights. From there, Blockbuster growth exploded bringing in external investors and national attention.

To facilitate the growth trends shown by Blockbuster since its inception, David Cook contacted H. Wayne Huizenga, a former colleague, as an investment opportunity. Huizenga bit at the opportunity and invested his own time and money as well into the expansion of Blockbuster. To summarize the extent of the growth of Blockbuster stores from the 1980s to 2002, gross revenue went from about $75,000 in the 1980s to over $6,000,000,000 by 2006. From the start of several stores in the 1980s, Blockbuster grew to as many as 5,803 as of the end of 2004. Additionally, the company has expanded into 29 countries including countries in North America, South America, Europe, and Asia. It has been estimated that there are more than 43 million American households with a membership to Blockbuster.

The twenty year journey of Blockbuster has not been without bumps, valleys, road blocks, and detours. Blockbuster has come under legal fire from Netflix, a major online competitor, the Free Trade Commission for attempting a host...

... middle of paper ...

...s trend means fighting a paradigm that is inevitable. The tricky part is balancing the rate of closing store without losing out on possible sales that each store could accumulate.

Finally, Blockbuster needs to take care of their debt, which currently amounts to $1,317,900,000 in current liabilities and $2,548,000,000 in total liabilities. These are dangerous numbers to have looming over your business. Blockbuster could liquidate assets or issue additional stock to get rid of some of the liabilities. By getting rid of so much debt, Blockbuster would improve their credit and make strategic decisions without worrying about their cash position.

In this paper I have analyzed the past and present condition of Blockbuster. Given the right circumstances and execution, Blockbuster can once again return to the video rental powerhouse status they enjoyed throughout the 1990s.