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After working in computer software, founder David Cook decided to open his own video-rental store in Dallas, Texas. His company was different from other rental stores because it offered customers a selection of 8,000 VHS tapes with the help of a modern, computerized check-out process, while other, smaller rental stores could only offer a couple hundred movies.
Blockbuster was known for charging customers a fee for every day they were late returning a movie rental. In fact, Blockbuster said it made $800 million in late fees, or 16% of its revenue, Quartz reported. This frustrated many customers, including Netflix founder Reed Hastings.
Hastings said he founded Netflix because he did not want to pay the $40 in fines he'd racked up at Blockbuster. In its early stages, Hastings' company, which had no late fees, would send DVDs straight to your house for a flat monthly rate.
Blockbuster considered buying the popular Netflix service for $50 million, but the company decided to not make the purchase. Netflix went on to become even more popular and more profitable than Blockbuster.
At the same time, Blockbuster decided to end late fees. It was estimated that it would cost the company $200 million to stop collecting late fees and another $200 million to start the new venture, Blockbuster Online, according to a Harvard Business Review article by former CEO John Antioco.
The standalone Blockbuster says it's still in operation because of its loyal customer base, citing the fact that the store has 4,000 accounts and signs up new customers each day. The store also said a large number of tourists visit the store to reminisce about the former rental company.
The Bend, Oregon Blockbuster couldn't afford the millions of dollars that a real Super Bowl ad would have cost. Instead, it posted its own homemade spot to Instagram and YouTube during this year's halftime show, the Los Angeles Times reported last month.
Fans of Blockbuster spotted a recent change to blockbuster.com. Whoever manages the website added "We are working on rewinding your movie" below the company's logo. Insider's review of past versions of the website using the Wayback Machine internet archive suggests that the change was made sometime last summer.
The revision, plus some tweets from the official Blockbuster Twitter account, caused some fans of the brand to speculate that it was planning a comeback, Hot Hardware reported this month. The company did not respond to Insider's request for comment on its website and tweets.
Netflix is also getting out of the DVD-rental business. It announced it would end its DVD-rental services on September 29, 2023, according to an official Twitter account dedicated to the DVD-side of the business.
Blockbuster[5] (formerly called Blockbuster Video) is an American multimedia brand and former rental store chain. The business was founded by David Cook in 1985 as a single home video rental shop, but later became a public store chain featuring video game rentals, DVD-by-mail, streaming, video on demand, and cinema theater.[6] The logo was designed by Lee Dean at the Rominger Agency.[7][8][9][10] The company expanded internationally throughout the 1990s. At its peak in 2004,[11][12] Blockbuster employed 84,300 people worldwide and operated 9,094 stores.[13]
Poor leadership and the impact of the Great Recession were major factors leading to Blockbuster's decline, as was the growing competition from Netflix's mail-order service, video on demand, and Redbox automated kiosks. Significant loss of revenue occurred during the late 2000s, and the company filed for bankruptcy protection in 2010.[14][15] The next year, its remaining 1,700 stores were bought by satellite television provider Dish Network,[16][17] and by 2014, the last 300 company-owned stores were closed.[18] Although corporate support for the brand ended, Dish retained a small number of franchise agreements, enabling some privately owned franchises to remain open. Following a series of further closures in 2019, only one franchised store remains open, located in Bend, Oregon, United States.[11][12][13][19][20][21]
Blockbuster's beginnings can be traced back to another company, Cook Data Services, founded by David Cook in 1978.[3][22] The company's primary goal was to supply software services to the oil and gas industries throughout Texas, but it was very unsuccessful.[22] Sandy Cook, David's wife, wanted to get into the video business, and her husband would soon study the industry and future prospects.[23] 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.[24][25] When he realized the potential in video rentals, Cook abandoned the oil industry and began franchising the Blockbuster store.[26]
The first Blockbuster store opened on October 19, 1985, in Dallas, Texas, with an inventory of 8,000 VHS and 2,000 Beta tapes.[27][28][29] 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.[3] Following early success from the company's first stores, Cook built a $6-million warehouse in Garland, Texas, to help sustain and support future growth that allowed new stores to open quickly.[3] Blockbuster would often custom-tailor a store's inventory to its neighborhood, based on local demographics.[3]
In 1987, Waste Management co-founder Wayne Huizenga, who originally had reservations about entering the video rental industry, agreed to acquire several Blockbuster stores.[30] 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.[31][32] 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.[33] Nintendo ultimately lost the battle, which paved the way for future video game rental.[33][34]
Blockbuster sponsored the Blockbuster Bowl in American football, which began in 1990[35] 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.[36] In 1992, Blockbuster acquired the Sound Warehouse and Music Plus music retail chains and created Blockbuster Music.[37][38] In October 1993, Blockbuster took a controlling interest in Spelling Entertainment Group, a media company run by television producer Aaron Spelling.[39] 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.[40] It also owned 35% of Republic Pictures; that company merged with Spelling in April 1994.[41]
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.[42] In 1993, he made an attempt to expand into other areas by investing in Viacom.[43][44] 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.[45] 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.[46] Viacom acquired Blockbuster in 1994 for $8.4 billion to help finance its bid for Paramount in the bidding war with QVC Network Inc.[47][48] Blockbuster's stock trade had been dropping steadily the months before the merger, with a small rise after the deal was announced,[49] and by the latter part of the decade, its worth was estimated to have fallen to just $4.6 billion.[50]
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.[51]
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[52] and the retail stores, then called Blockbuster Video, were renamed Blockbuster. The logo changed slightly, but retained the ITC Machine font.[53] In November 1996 Blockbuster confirmed that it was moving its headquarters from Fort Lauderdale, Florida, to the Renaissance Tower in downtown Dallas.[54] 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.[55] The second Blockbuster Entertainment Corporation was later merged into Blockbuster, Inc.[citation needed]
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