Blockbuster History

Blockbuster, Inc., is the company that oversees Blockbuster Video stores and Blockbuster Online mail-order rental service. It is a worldwide brand, operating in more than 20 countries, but the majority of its operations are based in the United States. Its stores are ubiquitous. You can find them almost anywhere in the country due to the large number of franchises and many corporate-owned stores. Blockbuster operated more than 7,000 stores as of January 2009 and reported $5.29 billion in revenue for fiscal year 2008.

BeginningsDavid and Sandy Cook started the company now known as Blockbuster Inc., in 1982, just when the VCR started make headway in American homes. It was originally known as Cook Data Services. David, a former software engineer, had what at the time were revolutionary ideas on how to make the rental business more cost-effective and efficient. In 1985, the first Blockbuster Video store opened up in Dallas, Texas, to serve as a competitor to the many local video stores that dotted the country.

InnovationThe Blockbuster store had a larger selection, at 8,000 tapes, than these family-owned video shops. It also had computerized inventory and the tapes were left out on store shelves, which made the checking-out process much faster. Other video stores required customers to sign out each tape individually and then wait for the clerk to get the tape out of a back room. The Blockbuster model also allowed customers to keep movies out for three nights instead of one, made stores family-friendly by refusing to stock adult films and stayed open until midnight every night of the week, even Sundays.

ExpansionThe Cooks' model was so successful that they had three more stores open by 1986. That's when they decided to rename their company Blockbuster Entertainment Corporation. The Cooks left the company in 1987, putting investor Wayne Huizenga in control. He favored aggressive expansion, which led to 15 corporate stores and 20 franchises by June 1987 and 133 stores by the end of that year. The company opened six regional offices in its push to operate from coast to coast.

TakeoversOne move of Blockbuster's that ultimately led to some backlash was its practice of buying up local video chains. These chains included Major Video, Inc.; Oklahoma Entertainment, Inc.; Vector Video, Inc. and several others. By the early 1990s, industry experts began to wonder if the chain was beginning to oversaturate the market. In response, it turned to overseas operations, opening up in the U.K. It now has major operations in Europe, South America, Australia and Japan.

The FallIn the late 1990s and early 2000s, Blockbuster started to get some real competition from the burgeoning online rental market as DVDs started to replace tapes. Its major competitor was Netflix, launched in 1999. DVDs were inexpensive to ship and not as fragile as tapes, plus they were much less expensive to purchase for renting out. Fewer people headed to the stores since they could rent movies at home over the Web. Though the company went public in 1999, it began reporting significant losses.

ChangesIn 2004 the company launched its own online rental service, Blockbuster Online, to try to gain back some of its market share. The system of charging late fees by the night was replaced with a new model that let customers buy their rented DVDs after a certain time period instead.

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