Netflix’s Reed Hastings: ‘Thank God’ Blockbuster Didn’t Buy Us

It’s hard to imagine that 20 years ago Netflix co-founder Reed Hastings and then-CFO Barry McCarthy sat in the Dallas corporate headquarters of Blockbuster Video begging the video store giant to buy the upstart by-mail DVD rental service for $50 million.

As the story goes, Blockbuster CEO John Antioco and other executives practically laughed Hastings and McCarthy out of the building. Blockbuster at the the time was a $5 billion company operating about 9,000 video stores worldwide. Netflix, by comparison, was running TV spots with Ryan Seacrest pitching consumers the concept of DVD movies in the mail. Subscription streaming video-on-demand (and Roku) was still a pipedream.

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Of course, Hastings today is the one laughing as the once mighty Blockbuster brand has been reduced to a singular independent store moonlighting as an Airbnb in Bend, Ore. Hasting is also mindful that Netflix dodged a corporate crossroad that could have significantly changed his life as well as the modern home entertainment ecosystem as we know it.

“Well, now I say thank God that they didn’t want to go ahead [with the deal],” Hastings told Yahoo Finance plugging his co-authored book, “No Rules Rules: Netflix and the Culture of Reinvention,” during an episode of “Influencers With Andy Serwer,” a weekly series featuring business, political, and entertainment leaders. “But you know, at the time, [Blockbuster was] so formidable and even later, when we went public, we were $50 million in revenue, and they were $5 billion, so a hundred times larger than us.”

Indeed, had Blockbuster acquired Netflix, it likely would have rebranded the upstart by-mail disc business. The million-dollar question remains whether the Blockbuster brass would have been receptive to SVOD and its impact on video stores. If not, the subscription streaming video business model might have died on the vine; binge-viewing left to TV on DVD boxed sets; co-CEO Ted Sarandos overseeing Blockbuster video stores; and HBO Max, Amazon Prime Video, Disney+ or Peacock just science-fiction.

“For our first decade, [Blockbuster] was such a big gorilla over our future,” Hastings said. “It was a number of things that made it possible for us to thrive, and eventually then have the chance to move into streaming.”

Today, Netflix has more than 193 million paid subscribers worldwide, and a Wall Street market cap around $223.5 billion.

Media Mogul (and Blockbuster Video Owner) Sumner Redstone Dead at 97

Sumner Redstone, the hardnosed media titan who only recently (2016) relinquished the executive chairman position of National Amusements, the private corporate parent of ViacomCBS, died Aug. 11 at age 97. National Amusements disclosed Redstone’s death on Aug. 12.

Redstone, who had been in declining health for years, only recently (and reluctantly) ceded control of National Amusements to his daughter, Shari Redstone. Last December, Ms. Redstone successfully re-merged Viacom and CBS after a 13-year separation originally pushed for by her father, including installing former Viacom boss Bob Bakish as CEO of the combined companies.

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“My father led an extraordinary life that not only shaped entertainment as we know it today, but created an incredible family legacy,” Ms. Redstone said in a statement. “Through it all, we shared a great love for one another and he was a wonderful father, grandfather and great-grandfather. I am so proud to be his daughter and I will miss him always.”

Much media attention has been focused on Sumner Redstone’s rise from lawyer and successful drive-in theater owner/operator, to corporate owner of Paramount Pictures, publisher Simon & Schuster, Nickelodeon, MTV, BET, Showtime, Comedy Central and TV Land.

But he also played a key role in the home entertainment industry. The billionaire  saw the promise of Blockbuster Video — and home video’s cash flow — before most.

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Viacom acquired Blockbuster in 1994 for $8.4 billion to help finance its bid for Paramount from the studio’s boss and QVC founder Barry Diller.

“The only reason we got into [Blockbuster], we really needed the enormous cash flow [from the movie rental chain] to service the [Paramount] debt,” Redstone said in a media interview. “Strategically it made a lot of sense, and also we thought Blockbuster was a good business.”

Indeed, the brand became synonymous with home video, VHS and DVD — at its peak, operating more than 9,000 stores worldwide.

Redstone said Blockbuster over the years had its fiscal and management issues dealing with competitors, including eventually a small by-mail DVD rental service named Netflix. Redstone said Blockbuster’s issues in the beginning included not having enough hits available to rent, which left consumers with only catalog.

“Every video store was operating the same way,” he said. “Blockbuster tanked at one point [and] I tanked with it. Suddenly, I went from being brilliant to stupid.”

Redstone said he moved to Dallas (Blockbuster’s corporate headquarters), hired Jim Antioco as Blockbuster CEO, and together went to the studios in California to hammer out landmark revenue-sharing agreements for VHS rental titles.

“We buy tapes for $6, instead of $65. We sell them for more than we pay for them. It was a bonanza for Blockbuster and a bonanza for the studios,” he said. “So the Blockbuster story is pretty good.”

Redstone, in the interview, credited Antioco for pushing revenue sharing, which he said saved Blockbuster and Hollywood. Revenue-sharing allowed studios to share in rental revenues in return for discounted product costs.

“Without [home video], the studios don’t exist,” he said.

Redstone would eventually spin off Blockbuster with Antioco in charge, saddling the chain with about $1 billion in debt, from which it never fully recovered. Antioco, in turn, wouldn’t fully realize the rising threat of Netflix, including infamously turning down co-founder Reed Hastings’ offer to buy the upstart service for $100 million.

Netflix would then create (with Roku) the nascent subscription video-on-demand market, which Blockbuster never embraced until it was too late. The chain, along with major competitors Hollywood Video and Movie Gallery, would eventually cease operations.

Pandemic Challenges Last Standing Blockbuster Video Store

The last operating Blockbuster Video store in the world in Bend, Ore., has survived Netflix, over-the-top video and transactional VOD. Now it’s facing another challenge that has nothing to do with technology.

When Oregon Gov. Kate Brown on March 23 ordered social distancing measures statewide to minimize the spread of the coronavirus, Blockbuster was deemed non-essential and closed for a week.

Store GM Sandi Harding and the store’s 15 employees proactively addressed COVID-19 by instituting one-way aisles and mandatory six-feet spacing between customers allowed into the store.

Harding said that when the store became the last standing Blockbuster, it had about 6,000 customer accounts on top of tourists who frequent the place for nostalgia and history. Most of the store’s DVD/Blu-ray Disc rental customers live in the area.

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“We’re going to be here for a while, we’ve dealt with these kinds of challenges, not the coronavirus, but we’ve dealt with all kinds of things throughout this whole thing,” Harding told Fox Business. “Everybody knows our story, and we don’t give up easy. So we’re going to definitely go down with a fight like every other small business in America.”

Considering Blockbuster at one time had more than 9,000 stores, $1 billion in revenue and had Netflix co-founder Reed Hastings offering to sell Blockbuster his upstart by-mail disc rental company, the Bend store is a testament to small business survival.

“I just ordered in some floormats, you know, because right now we have blue tape down,” Harding said. “I mean, I love these kids that work for me and our customers and the whole reason we’re here is because, you know, these people enjoy coming to our store and I don’t want it to not be safe.”

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‘The Last Blockbuster’ Documentary Trailer Released

The trailer to the full-length documentary The Last Blockbuster has been released. The clip promotes the 40-minute film, which outlines the rise and fall of the world’s largest video store chain, and the last location’s struggles to stay in business in Bend, Ore.

A premiere is slated for May 8 at the Tower Theater in Bend, to be followed by an afterparty at the Blockbuster store.

Funded in 2018 by a Kickstarter crowd-source social media platform and distributed by Pop Motion Pictures, filmmaker Taylor Morden and producer Zeke Kamm sought to interview people who had worked for Blockbuster back when the chain had 9,000 stores and 80,000 employees worldwide, was synonymous with home video and seen as an insurmountable threat by an upstart by-mail DVD rental service named Netflix.

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Blockbuster, which was based in Dallas, filed for bankruptcy in 2010, its remaining 1,700 stores acquired by Dish Network. The satellite TV operator later disclosed it bought the chain largely for its retail footprint and a future mobile telecom business it has just now organized through the acquisition of Boost Mobile.

When the filmmakers began their project, several operating Blockbuster stores still existed, including in Bend where they lived. When the next-to-last store (in Alaska) shuttered, the rush to get the documentary completed took on a sense of urgency.

“I remember saying, ‘so many people have worked at Blockbuster, some of them must be hilarious, interesting, famous, whatever,'” Kamm told Comicbook.com.

The trailer features commentary from indie director Kevin Smith, former Blockbuster CFO Thomas Casey, Ione Sky, Eric Close, Jamie Kennedy, Adam Brody, Samm Levine and Doug Benson, among others.

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“If there’s some cats in Oregon still scratching it out with, you know, ‘be kind, rewind,’ nothing wrong with that. That’s beautiful,” Smith says on the trailer.

Details when the doc is released on DVD, Blu-ray Disc or even VHS, as some Kickstarter contributors have requested, has not been disclosed.

One Last Blockbuster Video Standing

With the closing of a Blockbuster Video branded store in Australia, the venerable home video rental chain has just one location left in the world — in Bend, Ore.

At its peak, Blockbuster Video was the world’s largest video store with more 9,000 locations globally with $6 billion in annual revenue. Last year, the last of three Blockbuster locations shuttered in Alaska — another retail casualty to changing consumer habits, subscription streaming video and digital retail.

It’s hard to imagine that at one time Netflix co-founder Reed Hastings offered to sell the upstart rental service to Blockbuster for $100 million, which the chain refused three (!) times — a corporate blunder on par with original Beatles drummer Pete Best exiting the Fab Four.

Netflix still rents DVD and Blu-ray Disc titles to a dwindling number of subscribers — 2.7 million — while generating operating profit of $51.4 million during the most-recent fiscal quarter.

Blockbuster, in its last year before declaring bankruptcy in 2010, generated just $120 million from its remaining 300 stores in the U.S. — while sitting on $1 billion in debt, the result of a spin-off by former corporate parent Viacom in 2004.

To Sandi Harding, GM of the 20-year-old Blockbuster in Bend, the brand’s history makes the store special.

“We all have a kinship with the other Blockbusters,” Harding told CNN. “You can go to Redbox and you can get the new titles, but they don’t have the older ones. Netflix and Amazon don’t have everything, either.”

Former Dish Network CEO Joe Clayton Dies

Consumer electronics industry veteran Joe Clayton died Nov. 3 of an unspecified illness at the age of 69. CEO of Dish Network from 2011 to until his retirement in 2015, Clayton headed the satellite TV operator when it acquired Blockbuster Video out of bankruptcy and launched online TV service Sling TV, among other achievements.

“Joe was a man of passion and vision whose influence on our industry is remarkable in its breadth and depth,” co-founder and chairman Charlie Ergen said in a statement.

Clayton, who helped bring shock DJ Howard Stern to Sirius Satellite radio in 2004, was inducted into the Consumer Technology Hall of Fame in 2008 and received the trade organization’s Digital Patriot Award in 2013.

“Joe was a strong and ethical leader — a lion of the industry, who was larger than life,” said Gary Shapiro, CEO of CTA. “He saw the future clearly and helped lead the industry in areas including direct broadcast satellite, HDTV, and satellite radio.”

Ergen said Clayton was a master marketer of CE brands that included RCA, DirecTV, Sirius and Dish.

“He mentored and influenced generations of leaders across our industry, including me. I am grateful for Joe’s leadership, his friendship and his generosity,” said Ergen.

 

 

Doc on ‘Last Blockbuster’ Video Store Completes Funding

Popmotion Pictures Sept. 4 announced that it has completely funded its latest documentary project, The Last Blockbuster, via Kickstarter.

The Last Blockbuster chronicles the rise and fall of Blockbuster Video, once the nation’s leading video rental chain — whose slogan, “Make it a Blockbuster Night,” has been ingrained in pop culture.

At its peak, Blockbuster Video had more than 9,000 video rental stores, most of them with huge rental cassette inventories and massive “walls” of new releases. The advent of DVD, which shifted consumer behavior from renting cassettes to buying discs, triggered the chain’s decline, as did the rise of Netflix, which originally rented movies by mail, thus eliminating the return trips that consumers in survey after survey said they hated almost as much as another characteristic of video rental stores, late fees.

Blockbuster began losing money in the 2000s, and in 2010 filed for bankruptcy protection from its creditors. In 2011, the 1,700 Blockbuster Video stores that remained were bought by Dish Network, only to be systematically shuttered over the ensuing years.

The documentary follows the chain’s troubled history all the way down to the last remaining operational Blockbuster Video store in the country, which is located in Bend, Oregon.

The production team has launched a trailer and Kickstarter campaign to help complete the documentary, which may be accessed here.

While the project is now completely funded, with just under two weeks remaining on the Kickstarter project, the team is going to use any additional funds to expand the project with additional special features “and ideally can raise enough money to preserve the last Blockbuster store for eternity (in virtual reality),” according to a news release.

“When we started working on this documentary last year there were about a dozen Blockbuster video locations still standing,” said director Taylor Morden. “Now, we’re down to just one. As movie lovers and physical media enthusiasts, we took it upon ourselves to uncover the story of why? What makes Bend, Oregon and this store in particular so special? It’s a fun and uplifting story and quite frankly we think the world needs more stories like that these days.”

Blockbuster Video’s Wayne Huizenga Dies

Billionaire entrepreneur Wayne Huizenga, who propelled Blockbuster Video into a national brand, among other businesses, has died reportedly following a long battle with cancer. He was 80.

Huizenga, who lived in the Fort Lauderdale, Fla. area, excelled in many ventures including sanitation, automobile sales and hotels. A longtime sports fan, Huizenga at one time owned the National Football League’s Miami Dolphins, MLB’s Florida Marlins and NHL’s Florida Panthers.

But in 1987, Huizenga acquired a few upstart Blockbuster Video stores on a $1 million investment and grew the franchise from less than 20 locations to more than 3,700 stores globally. He sold the company to Viacom in 1994 for $8.4 billion.

At its peak, Blockbuster operated more than 9,000 stores, employing 84,300 people worldwide.

“It was sad to hear of the passing of Wayne Huizenga,” said Mark Fisher, president and CEO of the Entertainment Merchants Association (EMA). “Wayne was a true video industry pioneer. During his tenure at Blockbuster the blue and yellow stores became the symbol of video rental, and ‘Make It a Blockbuster Night’ entered the lexicon. Whether you worked for him, competed with him (as many of us did – and lost), or simply rented movies in his stores – you have to respect his impact on the in-home movie experience.”

In a 1997 interview with The Washington Post, Huizenga said that despite feeling technology would eventually render packaged media rental obsolete, he reluctantly sold Blockbuster.

“I didn’t want to sell it. I loved that business,” he told The Post.

As Netflix entered the market featuring by-mail DVD rentals, Blockbuster countered renting movies and TV shows through the mail. When Netflix launched the SVOD market, the writing was on the wall for video rental stores.

Blockbuster filed for bankruptcy in 2010 and was acquired in a fire sale by Dish Network. The satellite TV operator had hoped to use the remaining 1,700 Blockbuster stores to sell portable media devices, including cell phones, in addition to home entertainment.

Dish shuttered most remaining company-owned Blockbuster locations a few years later. As of last month, there remain nine Blockbuster franchise stores in operation, including two in Bend, Ore.

While many news reports suggest Huizenga founded Blockbuster, this was not the case.

Huizenga got  involved with Blockbuster two years after the chain was founded in Texas by David Cook. As he recounted in a June 2003 Fortune magazine article, “By the time I got involved, Blockbuster had already worked out some of the kinks.”

Cook, according to the Fortune story, started the video rental superstore concept in 1985 “as a way to apply what he knew about building giant databases.” He had already made his mark in the petroleum industry with the launch of David P. Cook & Associates  in 1978, which he took public in 1983.

But by then the oil industry was in trouble, and Cook went looking for something else to do. After investigating a video store franchise opportunity for a friend, he told Fortune, “I determined there might be a bigger industry there.” He opened a single superstore, in Dallas, on Oct.19, 1985. It was stocked with plenty of copies of the latest hits as well as older titles. Success came right away “The first night we were so mobbed we had to lock the doors to prevent more people from coming in,” he told Fortune.

Cook predicted his single Blockbuster might grow into 1,500 units and immediately began scouting around for more locations.  Following early success from the company’s first stores, Cook built a $6-million warehouse in Garland, Texas, using a bar-code inventory system to track the movements of 10,000 films per store. With the warehouse, he told Fortune, stores “could pop up instantly,” he told Fortune, while individual store inventories were tailored to neighborhood demographics.

Cook soon found Huizenga, “who agreed to put up about $18 million in return for voting control,” the Fortune story said. “Cook’s disagreements with one of Huizenga’s lieutenants led him to leave, taking some $20 million with him. ‘I’m clearly not the best manager in the world for a large corporation,’ says Cook, who openly admits he didn’t see it that way then. ‘I haven’t found anybody who doesn’t think Blockbuster did a whole lot better under Wayne – including me.’”