This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Blockbuster's Rise and Fall: The Long, Rewinding Road

Stocks in this article: BBI

Act 3: Blockbuster Goes Into Wide Release
By 1993 there were more than 3,400 stores and Blockbuster was looking beyond its core video chain business to fuel growth. Its next conquest -- the music industry. The company purchased music chains Sound Warehouse and Music Plus and entered a partnership with Virgin Retail to open music mega-stores in the U.S., Europe and Australia that were later called Blockbuster Music.

Huizenga had grandiose dreams when he dove into the music business, envisioning entertainment centers that rented movies, sold music, computer programs, video games and featured virtual reality entertainment arcades. Blockbuster entered into a deal with IBM to develop a system for instant duplication of CDs in-stores, creating a digital database. Huizenga was, technically, making the first foray into digital music. In his "music stores of the future" Huizenga foresaw customers to come in, browse a vast music selection, and then make their own customizable CDs of their favorite songs and artists.

Of course, music studios and record labels didn't react favorably to these ideas.

The company also invested in computer technology and added stakes in production companies, Spelling Entertainment and Republic Pictures, as well as Discovery Zone, a children's entertainment center. There were even discussions to build an entertainment complex to house Huizenga's growing roster of sports teams.

With a potential growth pipeline that could have made Blockbuster the McDonald's (MCD) of media, not just video stores, the company made a decision that could only be viewed as the catalyst that paved the way to its eventual downfall.

Act 4: Blockbuster Loses Its Way
In September 1993, Blockbuster proposed a $4.7 billion merger with media giant Viacom (VIA), which, at the time, was in a bidding war for Paramount Communications with QVC.

Blockbuster, eager to get in on this deal and grow its new media initiatives, heavily invested in Viacom to help sweeten its bid. But the prolonged takeover battle became a drain on both Viacom and Blockbuster, and merger talks stalled, driving down the stock of both companies. Viacom ultimately ended up purchasing Blockbuster for $8.4 billion.

The buyout ignited an executive shakeup, where Blockbuster saw CEOs resign at a rate of one a year for three years. Huizenga stepped down in September 1994 and was replaced by President Steven Berrard. Berrad held the post for just a year-and-a-half, before former Wal-Mart (WMT) executive, Bill Fields, stepped in. Fields unexpectedly resigned in spring 1997 and John Antioco took over that summer.

Antioco inherited a company in tatters: new releases weren't making it to the stores on time, a cutback in employees left store operations in shambles, and cash flow for the second-quarter of 1997 had plunged 70%. Its Blockbuster Music initiative wasn't growing as fast as Viacom would have liked, and had resulted in substantial losses for the parent company.

3 of 6

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs