Blockbuster Was Relying on a Drink Island to Revive Stores
Back in April, months or years after lots of other people, I got the idea that there was no way video chain Blockbuster could avoid bankruptcy. So I went to talk to a few people about how the company got into its sorry situation and what it planned to do to get out. One of the people I talked to was current Blockbuster CEO James Keyes. He swore that the company was not considering bankruptcy. Nonetheless, I was intending to write a story saying that Blockbuster was done for. Then there was that whole Goldman thing, which lead me to Cedar Rapids, and how that town and others lost money in the Goldman deal and were mistreated by Wall Street in general. Not to mention that whole thing in the Gulf. So Blockbuster beat me to it. But according to the bankruptcy papers Blockbuster filed today Keyes was officially considering bankruptcy even as early as May, weeks after we met. Probably earlier.
Why did I have the feeling that Blockbuster would soon be busted? From the file of reporting anecdotes that I have not yet worked into a story here it is:
In doing my initial research for the story a number of people I talked to said the big mistake that Blockbuster had made in the past was to do too much with their stores. When Viacom owned Blockbuster, they tried to turn the stories into a dumping ground of Viacom merchandise. Dolls and toys and books and other stuff. Other CEOs had added candy and popcorn and even stores that served pizza. Made sense to me. When you are going to watch a movie at home, pizza and candy seemed like likely pairings. But none of those items ever sold.
It turns out the movie renter has a limited time. You need to get your movie and get home to watch it. Spend too much time at the store and your evening was ruined. No time to watch the movie. So renters never stayed long enough in the store to pick up anything other than the rental. So in the early 2000s Blockbuster stripped most of that stuff out of the stores, or so they said.
During the interview, I asked Keyes how many stores he planned to close in the next year. At the time, he said he wasn’t planning on closing many stores. Instead, he had a new idea called Rock the Block that was going to make the stores dramatically more profitable. What’s more, he said the stores could act as a venue for showing off Blockbusters’ new home delivery technology. The company had partnered with some television and DVD makers to include Blockbuster branded software that can quickly download movies over the internet and immediately watch them on your TV. Put aside the fact that Keyes was using the stores to sell people on not using the stores, and this made some sense. Apple has been successful with its stores in getting out the message that the companies computers were hip and easy to easy. The stores turned the computers into something of a luxury item. So if Blockbuster could transform some of its stores into hip looking electronic outlets demonstrating the easy of their video demand service delivered though high-end TVs and DVDs and DVRs, I could see how Blockbuster would be able to rebrand itself.
So after the interview I made the drive out to one of Blockbusters new model stores, in a suburb of Dallas. Ironically, the highway exit for the store was named Legacy Drive. When I got there the outside looked like every other Blockbuster I had ever seen. The inside was cleaner, and gone was the blue carpeting that I remember from my teen years. But the biggest difference was that most of the middle of the store was taken up by something that you would expect to see in a 7-11. It was a huge drink machine. There were slurpee-like drinks and sodas and candy. They even had a machine that made milkshakes on the spot. There were cookbooks on the shelfs and games near the door. There was a few racks of movie posters. There was no display demonstrating Blockbuster’s new video on demand technology. Instead there was a small half display (the highest shelf was at waist level) with TIVOs (itself somewhat of a dying brand) and DVD players. And something called Blockbuster-in-a-Box, which allowed you to order videos online and watch them on your home TV, but was in the process of being phased out by the company. The new televisions and DVD players with Blockbuster movies at the press of the button were nowhere to be found.
The store manager said the food items had boosted sales, but not by that much. Few bought the games or books. He couldn’t remember the last time someone bought a poster. He said he had heard rumors now and then about Blockbuster filing for bankruptcy, and it was something that he and his wife worried about, especially since they had just had a kid, but he said he believed in Blockbuster so he thought the company would survive. I got a milkshake. It came in chocolate, vanilla or cookies and cream, and you could get it think, thin or regular. I opted for a regular shake remembering painful McDonald shake sucking experiences and insisted I pay figuring the store needed all the help it could get. The shake was still much too thick and much too sweet.