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

Blockbuster, for its part, was keenly aware of the impact the Internet could have on business, and did jump at the opportunity to capitalize on this new technology. The company formed a partnership with AOL (AOL), took initial steps toward streaming video, tested home delivery, rolled out e-commerce and formed a partnership with TiVo and DIRECTV.

Still, while Blockbuster discussed creating its own subscription service to rival Netflix, it wasn't until August 2004 that its online DVD rental program actually started in the U.S. And when, in 2004, Coinstar (CSTR) entered the market with its Redbox DVD kiosks, Blockbuster didn't begin installing similar devices until 2008.

And analysts also criticized the company for its late adopting of the DVD. In August 1999, a mere 1,000 Blockbuster stores carried DVD copies.

Act 6: Enter Stage Right -- Carl Icahn
In December of 2004, Blockbuster sought control of its biggest rival, the now defunct Hollywood Video, through a hostile takeover. Billionaire investor Carl Icahn was intent on seeing this deal done, and attempting to facilitate the takeover by becoming the largest shareholder of Blockbuster, with 9.98 million shares worth about $83.9 million.

Blockbuster proposed an offer of about $700 million, or $10.25 a share, later upping the bid to $1 billion. But Hollywood Video instead agreed to be bought out by Movie Gallery in January 2005.

With so much invested in Blockbuster, and a Hollywood Video deal squelched, Icahn looked for ways to beef up Blockbuster's return, butting heads with Antioco in the process.

In May 2005 Icahn waged a successful proxy fight to add himself, and two other members, to the board. Icahn accused Blockbuster of overpaying Antioco, who received $51.6 million in compensation in 2004.

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