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

As a result, Viacom sold off Blockbuster Music to Wherehouse Entertainment in August 1998 for $115 million.

In these dark times, Blockbuster was forced to shutter some international stores, cut rental orders and exit its PC business, essentially returning the company to its core video roots.

When Viacom purchased Blockbuster, it was banking on its robust cash flow to pay down the debt it incurred from the acquisition of Paramount. Instead Viacom found itself injecting more cash into Blockbuster then it was getting in return.

In an act of desperation, Viacom made an initial public offering of 18% of its stock in Blockbuster in August 1999 to raise money. But the offering only garnered $15 a share, below its expected range of $16 to $18, raising just $465 million.

Blockbuster's stock received a lukewarm reception on that first day of trading, as the video rental industry was already being viewed as a dying sector.



Act 5: Internet Kills the Video Store
"Imagine a Blockbuster night without Blockbuster, a time when no video store will ever slap you with a late fee or fine you for failing to rewind. Because in this world, there are no videos, only home computers," the Chicago Sun-Times wrote back in June 1999.

Already, the Internet was being viewed as a potential killer of the video industry.

At the time, Amazon (AMZN - Get Report) had just entered the market, expanding from selling cheap books online to cheap DVDs, and a little company called Netflix rolled out a subscription service.

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