Blockbuster Video
Categories: Dallas/Ft. Worth-based companies | Franchises
- This article is about the chain of video stores. For other uses, see Blockbuster.
Blockbuster Video is the largest chain of video tape, video game and DVD rental shops in North America. It is headquartered in Dallas, Texas, and has locations in twenty-nine countries, including the United States, Canada, the UK, Australia, and Taiwan.
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History
Blockbuster opened its first store on October 19, 1985, and with Wayne Huizenga at the helm it soon grew into a multi-billion dollar corporation. It was sold to Viacom in 1994. On October 13, 2004 Blockbuster separated from Viacom at Viacom's request.
At the end of 2004, Blockbuster's annual report put the number of U.S. stores at 5,803 (4,708 company-operated and 1,095 franchised). International stores (operating under Blockbuster and other brands) totalled 3,291, including 426 in Canada, 897 in Britain, and 408 in Australia. It has been claimed that there are more than 43 million U.S. households with Blockbuster memberships.
Blockbuster offers an internet-based DVD rental service in the United States and the United Kingdom. Also, Blockbuster rolled out Blockbuster Movie and Game Passes, which allow customers to watch whatever movies or games they wish for a monthly fee, although stores limit the number of movies or games a customer can have out at any one time.
Blockbuster also rolled out in-store Game Rush locations that provide a wide variety of games and systems, from older systems like the Nintendo Entertainment System to the modern PlayStation 2, Xbox and GameCube systems. Game Rush locations tend to offer special deals on game trading that seem to be focused on improving their inventory of used games rather than trying to actually cut a profit.
Subsidaries
The company has a large Irish subsidiary, Xtravision, which does not operate under the Blockbuster brand name. Blockbuster also owns Rhino Video Games and briefly attempted to acquire its competitor, Hollywood Video, in 2004.
Elimination of late fees
On January 1, 2005 Blockbuster introduced[1] their "End of Late Fees" program[2]. Instead of late fees, there is a seven day period after the due date when the item may be returned without charge. After this point, Blockbuster automatically charges the renter for the selling price of the unreturned item (less the rental fee). Customers may return the item with 30 days to have this charge reversed to store credit, less a "restocking fee" of $1.25 (which may be higher in participating franchised stores).
The loss of late fees eliminated a significant revenue stream for Blockbuster, and along with online rentals, has been dismissed by its main competitor, Movie Gallery[3].
On February 18, 2005 the Attorney General of New Jersey filed suit[4] against Blockbuster, alleging that it had failed to clearly disclose the terms of the new policy, and that some franchises were not participating in the program, had shorter grace periods, or charged higher restocking fees. Other states began looking into the program as well. On March 29 Blockbuster signed an "Assurance of Voluntary Compliance"[5] with 46 states and the District of Columbia (not including New Jersey), in which it agreed to more clearly inform customers of the terms and limitations of the program. A refund program was set up for those affected by the purchase charges or restocking fees, and rental coupons offered to compensate for late fees paid in non-participating stores prior to the agreement. Blockbuster also paid $630,000 to the states involved to cover the costs of the investigation.
The "End of Late Fees" progam is a corporate policy and is not binding on franchised stores in the US (approximately 18% of the total). Blockbuster's 2004 annual report claimed that approximately half of the franchises were participating, and that could leave a few hundred (less than 10% of all US stores) that have opted not to participate in said policy. These franchises continue to charge late fees as usual. Several franchise locations that initally accepted the corporate policy have also since abandoned it due to activity termed, "movie hogging" by renters who no longer feared the late fees.
The "End of Late Fees" policy was extended to Canada (where all stores are operated by the corporation) as of March 31, 2005 (See [6]).
Online operations
United States
In August 2004 [7], Blockbuster introduced an online DVD rental service in the U.S. to compete with the established market leader, Netflix. The initial price of the standard three-disc plan was $19.95, which was below the Netflix price (which was raised from $19.95 to $21.99 in June) [8].
In October, Netflix changed course and reduced its own 3-disc price to $17.99, and Blockbuster responded by reducing to $17.49 [9]. It made a further reduction to $14.99 in December, and apparently had guaranteed this price to existing customers until January 2006 [10]. However, in August 2005, Blockbuster raised their prices for new customers to match the Netflix level of $17.99 [11].
Blockbuster's U.S. online operation started with around 10 warehouses; further expansions [12][13] have brought that number to 30 [14]. The company had 1 million customers by August 2005, and has stated a target of 2 million by the end of the first quarter of 2006 [15].
United Kingdom
In the UK, Blockbuster has been providing a version of online rentals since October 2002 [16] with its "Pay Per Rent" [17] service. This is more like a postal version of store rentals than the traditional online DVD rental subscription model, with per-rental prices of £3.50-£4.50, with a rental period of 5 nights (not including postal delivery times), and late fees (£0.70-0.90 per disc) [18].
In May 2004, Blockbuster also introduced [19] a conventional online subscription service [20]. The unlimited 3-disc plan is £14.99/month.
Concerns and Censorship
Blockbuster's massive international permeation and domination of the video market has placed certain business practices under scrutiny. Critics of the chain, including Naomi Klein in her anti-globalization book No Logo, say that they use their power to enact censorship - this accusation stemming from the fact that Blockbuster are reputed to edit videos for release beyond the standard retail cut, or at the very least use their significant market share to influence studios to edit in order to lower their certification and reach a wider market.
Also on the subject of censorship, on November 27, 1990, the MPAA introduced the NC-17 rating in order to distinguish non-pornographic adult material from 'X-rated' materials. Under pressure from the Christian organisation the American Family Association, headed by Rev. Donald Wildmon, Blockbuster decided not to stock NC-17 titles, and certain "unrated" titles. The AFA also successfully campaigned against them carrying films such as The Last Temptation of Christ.
Further criticism is that their business model has led to a dilution of availability. The standard model for video rental stores was that they would pay a large flat fee per video, approximately US$65, and have unlimited rentals from the lifetime of the cassette itself. The new system, controlled by the distribution company Rentrak, and perhaps influenced by the studios due to the smaller space constraints and longer shelf-life of the DVD format, is based on royalties. Blockbuster obtain videos for little or no cost, and takes approximately half of the rental fee, paying the other half back to the studio and to Rentrak. Under this model, there is little incentive to purchase movies that have enduring interest for fewer people. Riding on the hype generated by the vast marketing campaigns of Hollywood blockbusters, they fill their shelves with multiple copies of the same brand-new film, which may have a shelf life of only 2-3 months, and combine this with a promise that the video will be in stock or you rent it for free the following time. This often leads to shelf-saturation, where there may be fifty copies of the latest hyped movie available, yet little, if any, older or foreign movies.
Advertising
One of Blockbuster's most well known advertising campaigns was launched during the 2002 Superbowl. It starred the voices of Jim Belushi and James Woods, as a rabbit and a guinea pig in a pet shop, located across the road from a Blockbuster store.
Slogans
- "Wow! What a difference!"
- "Make it a Blockbuster Night."
- "Let the good times roll!"
- "Go home happy."
- "Bringing entertainment home."
- "The end of late fees. The start of more."
- "Feel The Rush" (Note: Only applies to special "Game Rush" stores)
- "Renting is BETTER Than Ever."
- "Feel the FREE." (used in Canada for the Blockbuster REWARDS)
- "MORE from BLOCKBUSTER." (used in Canada)