This Day in History

THIS DAY IN HISTORY / OCTOBER 19, 1985
FIRST BLOCKBUSTER STORE OPENS.
On this day in 1985, the first Blockbuster video-rental store opens, in Dallas,
Texas. At a time when most video stores were small-scale operations featuring
a limited selection of titles, Blockbuster opened with some 8,000 tapes
displayed on shelves around the store and a computerized check-out process.
The first store was a success and Blockbuster expanded rapidly, eventually
becoming one of the world’s largest providers of in-home movies and game
entertainment.
Blockbuster was founded by David Cook, who had previously owned a business
that provided computer software services to the oil and gas industry in Texas.
Cook saw the potential in the video-rental business and after opening the first
Blockbuster in 1985, he added three more stores the following year. In 1987, he
sold part of the business to a group of investors that included Wayne Huizenga,
founder of Waste Management, Inc., the world’s biggest garbage disposal
company. Later that year, Cook left Blockbuster and Huizenga assumed control
of the company and moved its headquarters to Fort Lauderdale, Florida. Under
Huizenga’s leadership, Blockbuster embarked on an aggressive expansion
plan, snapping up existing video store chains and opening scores of new stores.
By 1988, Blockbuster was America’s leading video chain, with some 400 stores.
By the early 1990s, Blockbuster had launched its 1,000th store and expanded
into the overseas market.
In 1994, Blockbuster was acquired by the media giant Viacom Inc., whose
brands include MTV and Nickelodeon. In the mid-1990s, the digital video disc
(DVD) made its debut and in 1997, Netflix, an online DVD rental service, was
founded. Around that same time, the e-commerce giant Amazon.com launched
a video and DVD store. Blockbuster faced additional competition from the rise
of pay-per- view and on-demand movie services, through which viewers could
pay for and watch movies instantly in their own homes. In 2004, Blockbuster
split off from Viacom. That same year, Blockbuster launched an online DVD
rental service to compete with Netflix. As of 2008, Blockbuster had some 8,000
stores around the world and was well known for its advertising campaigns,
which included the long- running slogan “Make it a Blockbuster Night.” In 2006,
the company, headquartered once again in Dallas, had global revenues of more
than $5.5 billion.
BLOCKBUSTER BANKRUPTCY: A DECADE OF DECLINE
Months ago, the mere mention of bankruptcy in an article about Blockbuster

would provoke seething responses from company reps. on more than one
occasion, I received fuming messages from Blockbuster about how bankruptcy
was a “worst-case scenario” that was nothing more than “a last resort.”
Now the worst case scenario has arrived. Rumors of Chapter 11 began to
bubble in August, and Bloomberg reports that Blockbuster will file for
bankruptcy Thursday. (And it’s now officially initiated “pre-arranged” Chapter 11
proceedings.) 2
We’ve already presented the best of Blockbuster´s bad metaphors. Here, we
present a timeline of how the video rental giant fell.
1985: First Blockbuster store opens in Dallas.
1994: Viacom acquires Blockbuster for $8.4 billion.

1997: Reed Hastings returns Apollo 13 to Blockbuster six weeks overdue, and
is dismayed by the $40 late fee.
1998: Reed Hastings founds Netflix.
1999: Viacom holds Blockbuster IPO, valued at up to $4.8 billion.
2000: Blockbuster declines several offers to purchase Netflix for a mere $50
million. Instead, the company inks a 20-year deal to deliver on-demand movies
with Enron Broadband Services, a subsidiary of energy trading giant Enron.
2001: Enron files for bankruptcy amid accounting scandal.
2002: Blockbuster debuts Super Bowl ad starring the voices of Jim Belushi and
James Woods, as a rabbit and a guinea pig. The company posts a $1.6 billion
loss.
2003: Netflix posts first profit, earning $6.5 million on revenues of $272 million.
Redbox launches a kiosk rental service.
2004: Blockbuster enters online DVD rental market. Netflix CEO Reed Hastings
tells analysts in an earnings call, “In the last six months, Blockbuster has thrown
everything but the kitchen sink at us.” The following day, Hastings receives a
package from Blockbuster. Inside: a kitchen sink.
2005: Blockbuster launches a marketing campaign touting its new “No Late
Fees” policy. Subsequently, 48 states launch investigations into the program,
charging Blockbuster with misrepresenting its late fee policy to customers.
Blockbuster settles for $650,000.
2006: Blockbuster, now valued at $500 million, surpasses its goal of two million
subscribers for its online platform. Netflix reaches 6.3 million subscribers by
December.
2007: Blockbuster hires new CEO Jim Keyes, formerly of 7-Eleven. Keyes
decides to roll back the company’s Total Access plans. “Clearly our spending on
that one channel was exceeding our returns,” he said during a company
earnings call. After losing a half-million subscribers in the third quarter,
Blockbuster announces it will no longer report its subscriber count.
2008: Blockbuster proposes buying struggling electronics chain Circuit City.
Blockbuster soon withdraws its offer after it’s universally panned. Circuit City
files for bankruptcy in November. Keyes also expresses doubt about Netflix in
an interview: “I’ve been frankly confused by this fascination that everybody has
with Netflix…Netflix doesn’t really have or do anything that we can’t or don’t
already do ourselves.”
2009: Blockbuster rolls out Blockbuster Express, its kiosk system

designed to compete with Redbox.
March 2010: Blockbuster touts 28-day exclusive window over Netflix for new
releases. The company also reintroduces late fees, which had been costing the
company $300 million in revenue annually. 3
May 2010: In an interview with Fast Company, Jim Keyes is asked whether
Blockbuster’s financial troubles were due in part to Netflix’s success. “No, I don’t
know where that comes from,” he says. Keyes denies his company is going
bankrupt.
June 2010: Keyes compares Blockbuster to Apple, claiming that it’s On Demand
service is the equivalent of the iMac.
July 2010: Blockbuster launches Droid X app. Blockbuster is de-listed from the
New York Stock Exchange after shares hit all-time lows.
August 2010: Though ailing from a debt of $900 million, Blockbuster’s head of
digital strategy explains, “We’re strategically better positioned than almost
anybody out there. Never in my wildest dreams would I have aimed this high.”
Blockbuster adds video games to by-mail subscription plans for no additional
cost, but neglects to mention that new releases will not be available for three
months.
September 2010: Drowned in revenue losses of $1.1 billion, sources say

Blockbuster plans to file for bankruptcy. The company is valued at just $24
million.
Blockbuster history

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THIS DAY IN HISTORY / OCTOBER 19, 1985

FIRST BLOCKBUSTER STORE OPENS.

BLOCKBUSTER BANKRUPTCY: A DECADE OF DECLINE

Months ago, the mere mention of bankruptcy in an article about Blockbuster

1994: Viacom acquires Blockbuster for $8.4 billion.

2009: Blockbuster rolls out Blockbuster Express, its kiosk system

September 2010: Drowned in revenue losses of $1.1 billion, sources say

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