This document summarizes a new business plan for Blockbuster to address challenges in the video rental industry. Blockbuster faces increased competition from Netflix and digital streaming. The plan recommends closing underperforming stores, restructuring into a matrix model with partnerships, increasing retail merchandise, and leveraging video game and on-demand offerings. This would help differentiate Blockbuster, but risks include competition and funding uncertainty. The benefits could be increased liquidity, improved customer satisfaction and retention, and capturing new customers if successfully executed.

1. A New Business Plan

2. Scene Selection
Company Background
Industry
Competition
Marketing
Structure & Management
Financial Struggle
Recommendation
Risks & Benefits
Directed by: Mandy Sherman, Ryan Dangaran, Roy
Matsunaga,
Angela Bettenburg, Kyle Callahan, Brian DeHaan

3. Company Background
Founded in 1985 by David Cook
• Publicly traded after 1986 under the name Blockbuster
Entertainment
Acquired by Viacom in 1993 at a $8.4 billion price tag
• Split from Viacom and has since been known as
Blockbuster, Inc. 2004
Currently under the management of CEO Jim Keyes and 4
prominent executive VPs

4. Industry
Video Rental Market
• Traditional brick and mortar dominated by Blockbuster
• By-mail service revolutionized by Netflix
• Distinct competitive advantages
• Focus on convenience and low cost
Lack of Growth in Physical Film Market
• Segment contains In-store, Vending, Mail subscription
• Vending has grown, but only represents 3.3% of
Industry revenue
2%

5. Industry
Shift to Digital Media
• Cable and satellite video-on-demand
• Internet downloadable content
• Streaming video
19%

6. Competition
Highly
Concentrated
Capital Intensive
Threat of
Substitutes
Commodity Good
Market Share
Blockbuster
Netflix
Movie
Gallery
Independent
/Other
44%
13%
20%
23%

7. Competition
Entry
Barriers
Exit
Barriers
Intensity
of Rivalry
HIGH HIGH HIGH

8. Marketing Customers
Impulse
• Infrequent
• In-store
• Low brand loyalty
• Low price
sensitivity
• Advantage with
convenient
locations
In-Store Only
Total Access
• Lower
convenience-
sensitivity
• Higher price-
sensitivity
• Loyal to
traditional renting
Online Total
Access
• Tech proficient
• Convenience-
sensitive
• Expect low cost

9. Marketing
Blockbuster Netflix Redbox
Impulse
Rentals
$4.99 / new releases
$1 / non-new releases
None $1 / rental
Online
Subscriptions
$9.99-$19.99 $4.99-$16.99 None
In-Store
Subscriptions
$21.99
unlimited
None None
Competitor Pricing

10. Product Life Cycle

11. Marketing
•Distribution System
•Advertising and Promotion
as a percentage of sales
39 online-distribution centers
Reach 90% customers in 1 day
Netflix Blockbuster Movie Gallery

12. Management
•Centralized
•Bureaucratic
•Elaboration Stage

13. Organization
•Mature industry
•Functional-mechanistic
structure
•Hierarchical

14. Structure James W. Keyes
Chairman of the
Board & CEO
Regional
Manager
Store
Manger 1
Store
Manger 2
Regional
Manager
Store
Manger 3
Store
Manger 4
Regional
Manager
Store
Manager 5
Store
Manger 6
Eric H. Peterson
Executive VP/General
Counsel and Secretary
Thomas M. Casey
Executive VP & CFO
Kevin Lewis
Senior VP, Digital
Entertainment
Jeffery Calman
VP of New Media and
Studio Relations

15. Compensation & Control
Cash
Pay-for-
performance
bonuses
Stock
Options
Compensation
Output
controls
Boundary
controls
Control

16. Financials
Current Ratio
Quick Ratio
Blockbuster Industry Avg.
Cost of Goods Sold
As percentage of sales
2007 2004

17. Financials
Sales
Cash (10/5/08)
General &
Administrative
Current Stock Price (3/9/09)
Market Cap
Overhead declining as
percentage of sales

18. Recommendations
Allow leases to expire on poor performing stores
• 6% Store closure rate in 2008 has not significantly
affected store sales
Restructure into Matrix style
• New partnership with Sonic Solutions
Increase retail merchandise at remaining stores
• 4th quarter non-movie sales 36.5%

19. Recommendations
Video Game Industry
• 19% growth in 2007
Operating Plan
• Leveraging Sonic Solutions technologies
to create direct-to-console game rentals
Marketing Plan
• Incorporate into Total Access offering
Direct Video Game Downloads

20. Recommendations
Benefits for
• Blockbuster’s strong supplier relationship
• Improved variety of films
Benefits of
• Leverage existing infrastructure
• Reduce need for capital expenditure
Advantage over Netflix
• First-Mover advantage
On-Demand Blockbuster Channel

21. Risks
• Projects in Growth stage Uncertainty
• Competition Potential loss of first mover advantage
• Debt to Equity Ratio
• Lack of funding Liquidate & Close

22. Benefits
Increased Liquidity
Improve customer satisfaction
Differentiate from competitors
Retain existing customers
Capture new customers

23. Credits
Angela……………Stage
Director
Ryan……………………Film
Editor
Mandy..........Script
Supervisor
Roy……………………..…Pro
ducer
Kyle…………..Cinematograp
her
Brian……………….…………
Gaffer
Questions