The Rise and Fall of BlockBuster

Early Days

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David Cook made a living as a software engineer in the oil industry, but when that started going downhill, his wife Sandy suggested getting into the video rental game. The Cooks bought the Dallas Video Works franchise, then left to create Blockbuster Video, Inc. The first store opened on October 19, 1985, in Dallas, TX. From the outset, Cook wanted his store to be different. Unlike the mom-and-pop shops, Blockbuster had a massive inventory, starting with 8,000 VHS tapes and 2,000 Beta tapes. And the store actually put the tapes on shelves instead of using display cases and keeping inventory in the back. Another thing that made Blockbuster stand out was its bright blue and yellow color scheme throughout the store. They kept it mainstream and family-friendly, refusing to rent any adult films. But perhaps the most revolutionary aspect was Cook’s database expertise, which allowed him to use barcodes and keep track of inventory digitally. David Cook left his company in 1987, giving control to Waste Management co-founder Wayne Huizenga (HIGH-zing-ah) (and John Melk), who rapidly expanded the company. Huizenga began buying out the smaller rental stores and converting them into Blockbusters. At one point, there was reportedly a new store opening every day. By 1988, Blockbuster had 400 locations in the U.S. And soon after, the company went international and bought out Ritz stores in the UK.

With Huizenga’s guidance, Blockbuster became a multibillion-dollar company and the number one video rental retailer. And in addition to thousands of movies and television series, Blockbuster also rented video games and gaming consoles. Blockbuster nights were weekly occurrences for many people, especially when it came to slumber parties and family bonding, or just any Friday and Saturday night. Blockbuster commercials were everywhere, and some of the best in the 1990s and early aughts. In late 1998/early 1999, Blockbuster rolled out its rewards program, offering free rentals and giving customers even more of a reason to come back on a regular basis. After Time Warner announced its plan to upgrade their cable system in 1991, Blockbuster shares dropped 10%. Huizenga was sure that new advances in technology were a threat to the brick-and-mortar stores. So, he decided to get out and sell Blockbuster to Viacom for a whopping $8.4 billion in 1994, which the cable company needed to finance their bid for Paramount. Around this time, Blockbuster also explored other ventures like a massive Florida amusement park and what were essentially arcades for adults called Block Party. And from 1995 to 2001, Blockbuster even put on its own annual entertainment award ceremony. By 2004, Blockbuster was at its peak boasting 9,000 stores around the world. They’d opened Game Rush, in-store additions for video game and DVD trading.

Former president of Taco Bell John Antioco (anty-AW-co) became CEO of Blockbuster in June 1997. Warner Bros. offered Blockbuster an exclusive deal. Like their established deal for VHS, stores would get new release DVDs before they went on sale. But Antioco turned it down. Instead, WB gave the deal to Walmart, which sold the DVDs at a low price. Blockbuster couldn’t compete with those prices. Later that summer, Marc Randolph and Reed Hastings founded Netflix, which began as a DVD by mail rental service. It’s been said that the inspiration for the company was a $40 late fee Hastings acquired from “Apollo 13.” In 2000, Blockbuster made one of its biggest mistakes. Hastings approached the company and offered to sell Netflix for $50 million. Antioco rejected the idea, not ready to enter the online rental space just yet. In hindsight, this seems like an insane decision. However, at that time, Blockbuster was doing very well, and Netflix was still the new kid on the block. Four years later, Antioco saw the potential in an online market and launched Blockbuster Online. With a bigger selection of titles and a lower subscription price than Netflix, the company was highly successful at first. Blockbuster sweetened the deal in 2007 with Total Access which let customers exchange their online rentals in-store for a free rental. Despite its massive success, the company lost money from the slew of free rentals. By the mid-2000s, Blockbuster’s biggest competitors grew with the emergence of Redbox, Hulu, and Amazon Prime Video. And in 2007, Netflix got into streaming, and the rest is history. Well, not quite. There’s more!

Blockbuster’s Downfall

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Remember how awesome it was when Blockbuster got rid of late fees? Well, it may have been cool for us, but the company took a major hit. Late fees made up for $800 million dollars of Blockbuster’s revenue in 2000. And with customers keeping rentals for much longer, stores were often out of stock. Plus, franchise stores didn’t have to adhere to the policy, so customers found it confusing that some places had late fees and others didn’t. This actually led to lawsuits for false advertising, losing Blockbuster even more money. Major shareholder Carl Icahn (icon) wasn’t thrilled with all the big spending on online endeavors, or with Antioco’s large salary. By July 2007, former 7-Eleven CEO James Keyes took over for Antioco. Keyes made several bad decisions from the get-go, raising prices for Total Access and getting rid of in-store exchanges. Keyes was also vocal in the media about feelings about Netflix, saying he’s “confused by this fascination that everybody has” with the company. The year 2010 was not good for Blockbuster. In March, they tried a new thing called “Additional Daily Rates,” but like the no late fees, it just didn’t work. That same month, they issued a bankruptcy warning and by September, they’d filed Chapter 11 bankruptcy with $900 million in debt. In July, they were delisted from the New York Stock Exchange. In April 2011, Dish Network bought Blockbuster for $320 million, and announced later that year it would launch a Blockbuster Movie Pass. But it was only for Dish customers. Blockbuster tried to stay in the game with services like Blockbuster Express kiosks and a 28-day exclusive deal for titles from certain movie studios. But by early 2014, the remaining 300 corporate stores were closed, and online services were no more.

The last remaining franchised-owned Blockbusters in Alaska closed in 2018, leaving one store left in America. In 2020, the Bend, Oregon’s store and its longtime manager Sandi Harding were the subject of the nostalgia-fueled documentary “The Last Blockbuster.” Since then, more and more customers have made special trips just to visit the store and experience the good old days. During the early days of the COVID-19 pandemic, the store turned into an AirbnB, where guests could have a 90s themed sleepover. Ironically, Netflix began streaming “The Last Blockbuster,” and the streaming service has greenlit an original comedy series about employees working at the last Blockbuster. Even after decades of new technology and an abundance of streaming options, the love for Blockbuster is still going strong!