blockbuster case analsys by dare devil consulting

- for Blockbuster Inc.

Team Members:

Gopi Shankavaram

 Prem Brahmandam

 Ramamoorthy Narayanan

Nagesh Kambala

Situation AnalysisCurrent Situation (Blockbuster)

Market leader with 35% market share. 5000 stores (Video Rental), 30 K employees and $5.2 B revenue.

Huge say and large contracts with Studios.

Expanding into Mail-order , Vending , online streaming businesses,

Current Trends

Declining revenues, increasing operating loses.

Increasing Corporate debt, low working capital for expansion etc.

Netflix and Red box are disruptively stealing market share.

Challenges

Old fashioned employment practices, lack of innovation, low integration.

Ineffective inventory management in stores.

Mail order, vending, online content are cannibalizing in-store rentals.

Key Question: How should Blockbuster turn around?(Our vision for Blockbuster in 3-5 years).

In-Store Rental - Challenges• Stores not integrated, low convenience.• Huge fixed costs.How can we improve profitability in this model?

Mail Order - Challenges• Not very efficient in operations.• Inventory transfer problems.Can we sustain competition from Netflix?

Vending Machine:• Not integrated, mainly silos• high overhead costs.Can we compete with Redbox’s Low cost model?

On Demand:• Late entrants.• Not efficient technology.Can we disrupt?

Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010

Recommendation: Our vision of Blockbuster in 3-5 years

“Seamless integration” among all distribution channels.

customer

How to Achieve this?

Domestic Market Size (Movie & Video distribution)

2009:$24 Billion 2014E:$26 Billion

Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010

Industry Trends

Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010

Blockbuster’s Strategic Direction: Multi-Channel Access Business Model

Strategic Plan – Phase 1Significantly reduce store presence.

Current debt levels are unsustainable and store operations form a major cost.

Funnel the freed capital into business consolidation.

Integrate the current distribution channels.

Continue to build key partnerships with movie studios and game makers. Enhance repository of movies and

games.

Online Rentals is still a growth business. Leverage breadth and depth of movie

collection for mail-order business.

Expand rentals via Vending Machines Partner with nationwide chains (e.g. Target) No subscription-model

Focus on video game rentals Increase in proliferation of game

devices (Wii, Xbox, Playstation)

Strategy Plan – Phase 2Aggressively move

toward digital content offerings Movie on-demand Increased usage

from PCs, smartphones, PC/TV convergence

ConclusionsMovie Gallery is not an attractive acquisition

Store model does not align with our proposed strategic plan for Blockbuster

Current debt load and inability to finance does not favor an acquisition.

Pursue a phased multi-channel business consolidation Significantly reduce store footprint Resulting cost savings to be plowed back into

key growth areas (DVD online rentals, vending machines, VOD)

Q&A

Appendix Slides

Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010

Source: Blockbuster Inc. Investor Relations Presentation, Jan 3, 2010