1985–1996: Founding and early growth Blockbuster's beginnings can be traced back to another company, Cook Data Services, founded by David Cook in 1978. The company's primary goal was to supply software services to the oil and gas industries throughout
Texas, but it was very unsuccessful. Using profit he made from the sale of David P. Cook & Associates, the subsidiary of his company, he decided to buy into a video store franchise in Dallas known as Video Works. When Video Works would not allow him to decorate the interior of his store with a blue-and-yellow design, he departed the franchise and opened the first Blockbuster Video in 1985 under his own company Blockbuster Video Inc. When he realized the potential in video rentals, Cook abandoned the oil industry and began franchising the Blockbuster store. The first Blockbuster store opened on October 19, 1985, in
Dallas, Texas, with an inventory of 8,000 VHS and 2,000 Beta tapes. The chain's name is derived from the term
blockbuster, a Hollywood term for a successful film. Cook's experience with managing huge databases proved helpful in driving innovation within the industry. At that time, there were 19 stores, attracting Huizenga's associate John Melk's attention due to its efficiency, family-friendly no-pornography image and business model. Huizenga and Melk utilized techniques from their waste business and
Ray Kroc's model of expansion to rapidly expand Blockbuster, and soon they were opening a new store every 24 hours. They took over many of the existing Blockbuster franchise stores, and Huizenga spent much of the late 1980s acquiring several of Blockbuster's rivals, including Major Video. In 1989,
Nintendo attempted to halt Blockbuster's ability to rent video games, filing multiple lawsuits and lobbying the
U.S. Congress to ban the practice. Nintendo ultimately lost
the battle, which paved the way for future video game rental. Blockbuster sponsored the
Blockbuster Bowl in
American football, which began in 1990 and was played at
Joe Robbie Stadium outside
Miami. The first three editions were played under that name before Blockbuster withdrew its sponsorship. In 1990, Blockbuster bought mid-Atlantic rival
Erol's which had more than 250 stores. In 1992, Blockbuster acquired the Sound Warehouse and Music Plus music retail chains and created Blockbuster Music. In October 1993, Blockbuster took a
controlling interest in
Spelling Entertainment Group, a media company run by television producer
Aaron Spelling. Blockbuster purchased Super Club Retail Entertainment Corp. on November 22, 1993, from
Philips Electronics, N.V. for 5.2 million shares of Blockbuster stock. This brought approximately 270
Record Bar, Tracks, Turtles and Rhythm and Views music stores and approximately 160 video retail superstores into the corporation. It also owned 35% of
Republic Pictures; that company merged with Spelling in April 1994. Blockbuster became a multibillion-dollar company, but Huizenga was worried about how new technology could threaten their business, such as
video on demand and the growth of cable television. In 1991, just three days after Time Warner had announced it would upgrade its cable system, Blockbuster's shares dropped more than 10 percent. In 1993, he made an attempt to expand into other areas by investing in
Viacom. Huizenga also considered buying a cable company, but this was unknown territory for Blockbuster and he decided not to take the risk. He also had the idea of a 2,500-acre Blockbuster sports and amusement park in Florida, something Blockbuster was still considering as late as August 1994. Unable to come up with a proper solution about how to face the growing threats to the traditional videostore, he made the decision to sell Blockbuster to Viacom and pull out. Viacom acquired Blockbuster in 1994 for $8.4 billion to help finance its bid for
Paramount in the bidding war with QVC Network Inc. Blockbuster's stock trade had been dropping steadily the months before the merger, with a small rise after the deal was announced, and by the latter part of the decade, its worth was estimated to have fallen to just $4.6 billion. The Blockbuster Block Party concept was test-marketed in
Albuquerque, New Mexico, and
Indianapolis,
Indiana, in 1994. It was an "entertainment complex" aimed at adults, containing eight themed areas housing a restaurant, games, laser tag arena, and motion simulator rides, and was housed in a windowless building the size of a city block. The original Blockbuster company, Blockbuster Video Inc., was merged into the parent company Blockbuster Entertainment Inc. which had earlier replaced the Blockbuster Entertainment Company. In 1996, Blockbuster Entertainment Inc. merged into a new Blockbuster Entertainment Corporation and the retail stores, then called Blockbuster Video, were renamed Blockbuster. The logo changed slightly, but retained the
ITC Machine font. In November 1996 Blockbuster confirmed that it was moving its headquarters from
Fort Lauderdale, Florida, to the
Renaissance Tower in
downtown Dallas. Most of the workers at the Florida headquarters did not want to relocate, so Blockbuster planned to hire around 500 to 600 new employees for its Dallas headquarters. The company had offered various relocation packages to all of its Fort Lauderdale staff. The second Blockbuster Entertainment Corporation was later merged into Blockbuster, Inc.
1997–2006: Expansions, acquisitions, and peak In June 1997,
Taco Bell president
John Antioco resigned from the company to become CEO of Blockbuster. Also that year,
Warner Bros. offered Antioco an exclusive rental deal, seeing as DVDs were emerging as the new home video medium. Blockbuster was to have rights to rent new DVD releases for a period of time before they went on sale to the general public. The studio was to receive 40% of rental revenues in return, which was the same deal already in place for VHS rentals. Blockbuster turned the offer down, and the studio responded by lowering its DVD wholesale price in order to compete with the rental industry.
Walmart seized the opportunity and in a few years surpassed Blockbuster as the studios' single largest source of revenue. Other mass retailers soon followed suit, selling DVDs below wholesale price as a
loss leader in hopes of drawing more customers to their stores and selling them more profitable items. Unable to match prices, Blockbuster's business model was severely affected. In 1998, Blockbuster created
DEJ Productions, which acquired 225 films primarily to provide exclusive content to its Blockbuster stores prior to being sold off to
First Look Studios in 2005. , which stood until March 2023, when it was removed and listed for sale online In late 1998, Blockbuster launched a loyalty program called Blockbuster Rewards that allowed customers to earn free rentals, including one older title each month from the category of Blockbuster Favorites. After a 1998 test launch, the chain went nationwide with the program in 1999. In August the same year, Viacom sold the Blockbuster Music chain to
Wherehouse Entertainment, which was subsequently purchased by
Trans World Entertainment in 2003. In mid-2000, the company partnered with
Enron in an attempt to create a video-on-demand service. The agreement was supposed to last for 20 years; however, Enron terminated the deal in March 2001 over fears that Blockbuster would not be able to provide sufficient films for the service (
Enron also filed for bankruptcy that year). Also in 2000, Blockbuster turned down a chance to purchase the fledgling
Netflix for $50 million (~$ in ). In 2002, Blockbuster acquired Movie Trading Company, a Dallas chain that buys, sells, and trades movies and games, to study potential business models for DVD and game trading. Also that year, it acquired
Gamestation, a 64-store UK computer and console games retailer chain, and purchased DVD Rental Central for $1 million, an Arizona father-and-son online DVD-rental company with about ten thousand subscribers. DVD Rental Central would eventually become Blockbuster Online. On or around October 14, 2004, Blockbuster was spun-off from Viacom. Online DVD subscriptions were introduced on Blockbuster.com, also known as Blockbuster Online. Blockbuster also rolled out its "Game Rush" store-in-store concept to approximately 450 domestic company-operated stores. Blockbuster began game and DVD trading in selected U.S. stores. At its peak in 2004, Blockbuster had more than 9,000 stores worldwide. After several extensions of the tender offer, Blockbuster withdrew due to
FTC opposition. To counter the Blockbuster offer, Hollywood Video agreed to a buyout in January 2005 by a smaller competitor, the
Dothan, Alabama-based
Movie Gallery. Since then, Movie Gallery has filed for bankruptcy twice and its entire chain of stores has been liquidated. In May 2005, financier
Carl Icahn waged a successful
proxy fight to add himself and two other members to the board. Icahn accused Blockbuster of overpaying chairman and CEO John F. Antioco, who had served in that capacity since 1997, receiving $51.6 million (~$ in ) in compensation for 2004. Icahn was also at odds with Antioco on how to revive profit at Blockbuster. Antioco scrapped late fees in January, started an internet service, and decided to keep the company independent, while Icahn wanted to sell out to a
private equity firm. Also in 2005, Blockbuster began a campaign promoting its "No more late fees" policy. The campaign proved controversial, with
Associated Press reporting that the new policy actually charged users the full price of the movie or game after eight days which they could cancel by returning the product in question and paying a fee. More than 40 states filed suit against the company for false advertising.
2007–2011: Leadership changes, decline, and bankruptcy envelope A billion-dollar campaign called "Total Access" was introduced in 2007 as a strategy against Netflix. Through Blockbuster Online, customers could rent a DVD online and receive a new movie for free when they returned it to a Blockbuster store. While it was a major success every free movie cost the company two dollars, but the hope was that it would attract enough new subscribers to cover the loss. Netflix felt threatened, and Netflix CEO
Reed Hastings approached Antioco with a suggestion to buy Blockbuster's online business. In return, a new system would be introduced where customers could return their movies to a Blockbuster store. Before the deal could be realized, board member Carl Icahn intervened, refusing to let the company lose more money through Total Access. Antioco was pushed out in July and replaced with James Keyes, who rejected Hastings' proposal, raised the price of online DVD rentals and put an end to the free movie deal. As a consequence, Blockbuster Online's previously massive growth quickly stopped. Antioco's departure reportedly also involved continued controversy over his compensation. He left with a $24.7 million (~$ in ) severance package. On June 19, 2007, after a pilot program launched in late 2006, Blockbuster announced that it had chosen
Blu-ray over
HD DVD format to rent in a majority of its stores. In the pilot program, Blockbuster offered selected titles for rental and sale in 250 stores. Blockbuster stocked Blu-ray titles in almost 5,000 stores across the United States, Canada, the United Kingdom, Mexico, and Australia. On July 2, 2007, the company named
James W. Keyes, former president and CEO of
7-Eleven, as the new chairman and CEO. He introduced a new business strategy that included enhancements to existing stores. The following month in August, Blockbuster acquired
Movielink for $6.6 million (~$ in ), forecasting a shift to streaming video. Movielink was an online video service that allowed customers to download movie rentals from a library of over 6,000 films, created in 2002 by five major studios including Warner Bros, MGM Studios, Paramount Pictures, Sony Pictures, and Universal Studios. The move gave Blockbuster the opportunity to move away from the unprofitable Total Access (DVD-by-mail) service in favor of online streaming. Despite growing competition from Netflix and Redbox, the company downplayed the threat, choosing instead to focus on Apple and Walmart as their primary competition. On February 17, 2008, Blockbuster proposed a buyout of struggling
Circuit City. However, following a
due diligence review of Circuit City's financial books, Blockbuster withdrew its offer in July 2008. Analysts were not favorable to the proposed deal, viewing it as a desperate effort to save two struggling retailers rather than a bold turnaround initiative. Subsequently, Circuit City filed for bankruptcy on November 10, 2008, and, after liquidating all of its stores, ceased operations on March 8, 2009. At the beginning of 2010, Blockbuster had over 6,500 stores, of which 4,000 were in the United States— a number that fell to 3,425 in late October the same year. In the United States it planned to close between 810 and 960 retail stores, and instead launch as many as 10,000 "Blockbuster Express" video rental kiosks by the middle of 2010. It has been claimed that more than 43 million U.S. households had Blockbuster memberships. On February 10, 2010, Blockbuster announced that it would cease all its operations in Portugal, closing down 17 outlets and leaving over 100 workers unemployed. Blockbuster representatives in Portugal blamed
internet piracy and the lack of government response to it as the key factors to the company's failure in the country. In March 2010, Blockbuster began "Additional Daily Rates", or "ADRs", for rentals not returned by their due date in the United States, having already used this procedure in other countries such as the UK for many years. An ADR was charged for each day a member kept the rental beyond the rental terms. On March 12, 2010,
PricewaterhouseCoopers, Blockbuster's independent registered public accounting firm, issued its audit opinion disclosing substantial doubt about Blockbuster's ability to continue as a
going concern. This report was included in Blockbusters's 10-K SEC filing. On March 17, 2010, Blockbuster issued a bankruptcy warning after continued drops in revenue threatened its ability to service its nearly $1 billion (~$ in ) debt load. By April 1, 2010, Carl Icahn had resigned from Blockbuster's board of directors and sold nearly all his remaining Blockbuster stock. Blockbuster paired up with
Time Warner to have
Warner Bros. movies made available in Blockbuster stores on the DVD release date and not be subject to a four-week delay. Similar agreements were also made with
Universal and
20th Century Fox. The liquidation of
Movie Gallery began in May 2010, eliminating Blockbuster's primary competitor. During the same month a dissident shareholder, Gregory S. Meyer, in an effort to be elected to Blockbuster's board of directors, engaged in a
proxy battle with Blockbuster's board, alleging that the board had been responsible for significant destruction of value to shareholders. Meyer was elected to the board at Blockbuster's shareholder meeting in Dallas on June 24, 2010. On July 1, 2010, the company was delisted from the
New York Stock Exchange (NYSE) after its shareholders failed to pass a
reverse stock split plan aimed at heading off involuntary delisting because of the stock's trading at well below $1 per share. The stock was then traded on the
OTCBB (over-the-counter bulletin board). (2012) Blockbuster was unable to make a $42.4 million (~$ in ) interest payment to bondholders and was given until August 13, 2010, to pay off the debt. The company hired Jeff Stegenga to be its chief restructuring officer (CRO) in an effort to satisfy bondholder demands and recapitalize the company. After failing to pay on August 13, bondholders gave Blockbuster until September 30, 2010. On August 26, 2010, news media reported that Blockbuster was planning to file a pre-packaged Chapter 11 bankruptcy in mid-September. In light of this news, the company's chief financial officer (CFO), Tom Casey, resigned on September 11. He was replaced by Dennis McGill, formerly CFO of Safety-Kleen Systems, Inc. On September 23, 2010, Blockbuster filed for
Chapter 11 bankruptcy protection due to challenging losses, $900 million (~$ in ) in debt, and strong competition from
Netflix,
Redbox, and video on-demand services.
Movie Gallery/Hollywood Video had filed for
Chapter 7 bankruptcy liquidation earlier in 2010 for similar reasons. At the time of its Chapter 11 filing, Blockbuster said it would keep its 3,300 stores open; It was reported in February 2011 that Blockbuster and its creditors had not come up with a Chapter 11 exit plan and that the company would be sold for $300 million (~$ in ) or more, along with taking over debts and leases. Blockbuster admitted that it might not be able to meet financial obligations required under its Chapter 11 filing, a circumstance which could mandate conversion of the bankruptcy filing to Chapter 7 (liquidation). On March 1, 2011, the
U.S. Department of Justice filed a claim disclosing that Blockbuster did not have the funds to continue reorganizing and should liquidate.
2011–2015: Dish Network acquisition and store closures On March 28, 2011, South Korean telecommunications company
SK Telecom made a surprise bid to buy Blockbuster.
Dish Network had also expressed interest in bidding, as did Carl Icahn, despite calling Blockbuster "the worst investment I ever made". Dish eventually won the auction on April 6, 2011, agreeing to buy Blockbuster for $320 million (~$ in ) and the assumption of $87 million (~$ in ) in liabilities and other obligations. In April 2011, Dish Network told the U.S. Bankruptcy Court that it needed more time to negotiate with landlords in an effort to keep more than 600 Blockbuster stores open. Blockbuster's landlords objected to its assumption of leases that it sought to assign to soon-to-be-owner
Dish Network Corp., claiming that they did not have adequate assurance that the new owner would honor those leases. Blockbuster signed a deal with
ITV Studios Global Entertainment to launch ITV Programmes released on DVDs, Blu-rays, etc. On May 6, 2011, Keyes resigned as Blockbuster's CEO. Keyes was replaced by Michael Kelly under the new title of Blockbuster's president. On August 31, 2011, the liquidators announced the closure of the remaining 253 Canadian stores and shutting of the entire Canadian unit. In September 2011, it was announced that Blockbuster and Dish Network would launch a new service called Blockbuster Movie Pass that would compete with Netflix. For $10 per month the members would have access to both a streaming service and movies and games-by-mail. The package was only available for subscribers of Dish Network's pay-TV service, and it eventually folded. undergoing a liquidation sale in 2013 On January 13, 2012, Dish CEO Joe Clayton announced that while Dish had planned to keep 90% of the stores in operation, meaning around 15,000 employees would remain employed, because of market factors "there are ones that aren't going to make it. We will close unprofitable stores. We will close additional stores." Clayton did not say when these additional closings would happen and only remarked that some stores were unprofitable. The Dish chief would not say which stores the company was planning to close, but that each potential closing was to be assessed on a "case by case basis". On October 4, 2012, Dish Network announced that it was scrapping plans to make Blockbuster into a
Netflix competitor. On January 16, 2013, Blockbuster UK entered into administration and
Deloitte was appointed to run the business while trying to find a buyer while some of the stores remained open. Between November 6, 2013, and January 12, 2014, Dish Network closed all 300 remaining corporate-owned Blockbuster stores in the United States and the DVD-by-mail program was shut down. The Blockbuster official website identified 51 franchise locations remaining in operation in the United States in 2014. Dish maintained its video streaming services, Blockbuster on Demand and Blockbuster@Home, until they were replaced by a new subscription service in April 2015 called "DISH Movie Pack". In May 2015, Michael Kelly retired from Dish. Blockbuster's decline was attributed to poor leadership according to others in the industry. Franchise owner Ken Tisher said in 2015, "Blockbuster, if it isn't already, is going to go into the Harvard Business Review for how not to run a business, or how to run a business into the ground." Keith Hoogland, owner of
Family Video, attributed poor decision-making as a primary reason the company did not survive. Jonathan Salem Baskin, a former Blockbuster marketing communications executive, stated, "Digital would have changed Blockbuster's business, for sure, but it wasn't its killer. That credit belongs to Blockbuster itself." Commentators view Blockbuster as a main example of failing to change with the times.
2015–present: Final international closures and the last Blockbuster located in
Bend, Oregon Although Blockbuster stores had the option of remaining open by paying a licensing fee to Dish, a corporate entity was no longer available to provide supplies of branded products, forcing franchisees to design and produce their own. Additional store closures continued. By January 2018, the company's website listed nine remaining franchise-owned stores in the United States, including six in Alaska, two in Oregon, and one in Texas. Eight of those nine had closed by August 2018, leaving only
one store in
Bend, Oregon. In January 2020, the last remaining store outside of the United States, located in
Dargaville, New Zealand, closed its doors. The Bend location became the last remaining Blockbuster in the world; it serves as a tourist destination, housing Blockbuster memorabilia and
Russell Crowe film props which
John Oliver had donated to an Alaska store. In August 2020, the location was listed as an
Airbnb rental for a 1990s-themed sleepover on three separate nights in September; each were limited to guests from the area in light of the
COVID-19 pandemic. The entity that operated Blockbuster prior to the sale to Dish remains nominally active under the name BB Liquidating Inc., and trades as a
penny stock. However, it no longer has any assets or ties to the Blockbuster brand or its remaining franchise location. In activity related to the
GameStop short squeeze of January 2021, the BB Liquidating stock surged, despite there being "no value for the common shareholders in the bankruptcy liquidation process, even under the most optimistic of scenarios." On September 21, 2022, the Blockbuster
Twitter account revealed the Blockbuster World Video Game Championship 3. The event was held during the Portland Retro Gaming Expo 2022. On March 23, 2023, the Blockbuster web page was re-activated, with the message "We are working on rewinding your movie". ==Business model==