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.
In September 1993, Blockbuster proposed a $4.7 billion merger with media giant Viacom (VIA - Get Report), 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.