Blockbuster faced challenges competing against Netflix and Redbox's leaner operating costs for DVD rentals. The document analyzes options for Blockbuster to adapt, scoring partnering with cable providers to provide on-demand streaming as the optimal solution. This would leverage Blockbuster's studio relationships while liquidating retail stores to reduce overhead. Risks like content libraries and user adoption are mitigated through strong partnerships and intuitive interfaces. Project implementation and ongoing operations would be carefully monitored and controlled.

1. #TechDummies ISTM 654.32
Movie Rental Business
Blockbuster, Netflix, Redbox
1 I
2006200320001994199119881985 1997
Ayelet Awad | Frank Fisher | Paul Gonzalez
Blake Kuchar | Wes Sullivan
BY: #techdummies
2010
2014

2. #TechDummies ISTM 654.322 I
Role
Movie Rental Business
CEO
Jim Keyes

3. #TechDummies ISTM 654.323 I
Case Summary
Movie Rental Business
 Blockbuster’s B&M =
Unsustainable operating costs
 Netflix (Subscription) & Redbox
(Kiosks) = lean operating costs
 Blockbuster remained
unresponsive until it was too late

4. #TechDummies ISTM 654.32
4 I
Critical Issue
Movie Rental Business
How does Blockbuster survive?

5. #TechDummies ISTM 654.325 I
Metrics
Movie Rental Business
1. Financial Health 1. Level of Investment 1. Adaptability
a. Debt/Asset Ratio a. Implementation Cost a. People
Low: < 40% Low: < 50MM Low: < 5,000
High: >= 40% High: >= 50MM High: >= 5,000
b. Operating Profit Margin b. Timeframe b.Technology investment
Low: < 15% Low: < 1 Year Low: < 3MM
High: >= 15% High: >= 1 Year High: >=3MM

6. #TechDummies ISTM 654.326 I
Weights
Movie Rental Business
Adaptability
25%
Financial Health
35%
Level of Investment
40%

7. #TechDummies ISTM 654.327 I
Scorecard
Movie Rental Business
Metrics
Description Financial Health
Level of
Investment
Adaptability Total
Option 1
Option 2
Option 3
Option 4
Weighted Scores
Description 35% 40% 25% 100%
Option 1
Option 2
Option 3
Option 4

8. #TechDummies ISTM 654.328 I
Potential Solutions
Movie Rental Business

9. #TechDummies ISTM 654.329 I
Scorecard
Movie Rental Business
Metrics
Description Financial Health
Level of
Investment
Adaptability Total
VOD (Partner with Cable Provider) 2 4 3 9.00
Pizza & Movie Rental 3 1 2 6.00
Electronic Sell Through Platform 4 2 3 9.00
Blockbuster Electronics 1 1 2 4.00
Weighted Scores
Description 35% 40% 25% 100%
VOD (Partner with Cable Provider) 0.7 1.6 0.75 3.05
Pizza & Movie Rental 1.05 0.4 0.5 1.95
Electronic Sell Through Platform 1.4 0.8 0.75 2.95
Blockbuster Electronics 0.35 0.4 0.5 1.25
Optimal Solution: Partner with Cable Provider to provide Blockbuster-branded VOD services.
• Leverage Studio relationships to deliver new release & catalog content
• B&M to pure digital distribution
• Lean Operating Costs (liquidate all retail stores)

10. #TechDummies ISTM 654.3210 I
Implementation Timeframe
Movie Rental Business
Liquidate all stores during
Chapter 11
• 6 Months
• KPMG
• 75MM+
Operationalize & Go Live!
• 1 Month
System Integration
• 1.5 Months
• IBM
• 2MM
Build Infrastructure
• 3 Months
• KPMG
• 4.5MM
 Reduction in Overhead Cost  Highly Convenient  Low Marketing Cost
Value?

11. #TechDummies ISTM 654.3211 I
Risk & Mitigation
Movie Rental Business
 Weak to Small Content Library  Strong Studio Partnerships
 Dependence on Cable Provider  Partner with multiple Cable Providers
 User Adoption  Intuitive Interface & Functionality
 Long Term Studio Acceptance  Appealing Revenue Model

12. #TechDummies ISTM 654.3212 I
Controls
Movie Rental Business
 Project Implementation Team to
manage timeline & budget
 Any software or hardware cost
variance over 5% must be approved
by steering committe
 Weekly project status meetings using
a RAG process
 Use project management software to
track and report status, progress,
issues.
 Weekly project scorecards to monitor
employee efficacy
 Hire & train a technology team to
operate an maintain the VOD
structure
 Team is responsible for maintaining
99.99% SLA uptime
 Create runbook to resolve critical
system issues
 Reward cable partners for reaching
monthly VOD sale targets
 Use monitoring dashboard to
proactively address system issues
Project Operational
• RED: requires a full assessment
before project can continue
• Amber: requires proper
communication to the board and
careful progress monitoring
• Green: indicates no issues &
project is on-time
• Weekly automatic outage
reports that monitor uptime
• Real time alerts to notify
engineers of system issues

13. #TechDummies ISTM 654.3213 I
Movie Rental Business
Blockbuster, Netflix, Redbox
Questions?