...4-1-2013 A Blockbuster Failure: How an Outdated Business Model Destroyed a Giant Todd Davis John Higgins Recommended Citation Davis, Todd and Higgins, John, "A Blockbuster Failure: How an Outdated Business Model Destroyed a Giant" (2013). Chapter 11 Bankruptcy Case Studies. http://trace.tennessee.edu/utk_studlawbankruptcy/11 This Article is brought to you for free and open access by the College of Law Student Work at Trace: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Chapter 11 Bankruptcy Case Studies by an authorized administrator of Trace: Tennessee Research and Creative Exchange. For more information, please contact trace@utk.edu. A Blockbuster Failure: How an Outdated Business Model Destroyed a Giant Todd Davis, John Higgins Table of Contents I. Introduction 1 II. Background Information 1 a. Business Model 5 b. Key Events Leading to Chapter 11 7 III. Chapter 11 12 a. “The Plan” 12 b. Filing 14 c. Petition Schedules: Liabilities, Creditors, and Assets 15 d. First Day Motions 19 e. DIP Financing 28 f. The Unsecured Creditors Committee 32 g. Administrative Expenses – Professional Fees 32 IV. The § 363 Sale 38 a. Road to the § 363 Sale 38 b. The Motion 41 c. Sale Terms 42 d. Blockbuster’s Business Justification for the § 363 Sale 46 e. Assumption and Assignment 48 f. Administrative Relief Requested 49 g. Creditors Object to the Proposed...
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...Business Failure Analysis Many companies lose their businesses due to underestimating startup costs, depending on others, and hiring the wrong people. Then there are others that become successful from having an understanding of the customer, having charisma and perseverance as well as seeing failure as an opportunity to learn (Conrad, (n.d.). Blockbuster is known for their business failure back in 2010. The rental chain which was one of the largest video rental chains in the United States filed for bankruptcy. Around the same time Hollywood videos filed for bankruptcy. That signaled the end of store-based video rentals. Their failure was a result of not preparing for the change from store video rentals to streaming and online rentals. Both paid the price when their mistakes lead to a failed business. The best time for their business was in the 1980s and 1990s. In that time many people owned a videocassette recorder and renting from a store was the only alternative to a movie theater. Around this time video rental companies did not exist; only from small home owned stores. This allowed for David Cook and his wife Sandy to open their first Blockbuster rental company in Dallas, Texas. Because of his inexperience in the rental business he lost his funds due to an article written by Barron. At this point the company finished with $3.2 million in 1986. After this incident he ended up selling a majority position for $18 million to a group of investors. Wayne Huizenga was a part...
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...An Organizational Failure: Blockbuster Rana Fawad 1. Describe and discuss how the organization’s culture facilitated the failure. Philips (2011) believes that success or failure of any great company depends on “Events, internal and external” (p. 3). Blockbuster also appears to be a victim of certain events at internal as well as external level. Based in McKinney, Texas, Blockbuster and founded in 1985 (Blockbuster Corporate, 2012) and it ushered in a new era as far as video rental retail industry was concerned. The company gave birth to video rental places that had significant amount of movies under one roof (the first store had 8,000 movies) and were not associated with bad movies or bad neighborhoods (Greenberg, 2008). Initially, the company’s strategy was to expand aggressively and the leadership defined Blockbuster’s vision to become McDonald’s of the video rental business. Referring to the company leadership’s ambitious goals, Greenberg writes: The Blockbuster strategy was simple – pump as much money as possible into buying local and regional chains while keeping centralized control over the look and feel of the individual stores. By the VSDA convention the following year, Blockbuster had acquired two other chains and its more than 250 stores dotted the country. At the convention, Huizenga’s marketing executive Tom Gruber outlined vision for the future of the company, and it was expansive. Gruber had spent eighteen years working for McDonald’s before...
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...Failure Analysis/Change Strategy: Blockbuster vs Netflix LDR/531 Failure Analysis/Change Strategy: Blockbuster vs Netflix Organizational Behavior Theories The organizational behavior theories which explains Netflix’s success are two; decision-making and systems approaches. Netflix made the monumental decision to become a virtual dvd rental versus a brick and mortor provided a solution in the company’s goal and vision to be ahead of technological advances in the industry. Netflix took on the systems approach in understanding and measuring the company’s input and output processes. Netflix uses the systems approach to integrate and drive processes in developing adaptive capacities, driving innovation. Blockbusters organizational behavior theory focus was on scientific leadership. The company placed a great deal of focus on how to become more effective in the company’s brick and mortor business, redefining company objectives and direction. How employing this theory failed the company was the leadership decision to not pledge the same level or more focus on the click initiative which the company could not capture the needed momentum in becoming competitive with Netflix. Blockbuster could have had a more competitive edge over Netflix sustaining its presence in the industry if only the company could define better performance practices leveraging its click business over its brick and mortor presence. Role of the organization on the Fail/Success So how did an upstart company...
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...Business Failure Analysis LDR 531/Organizational Leadership Business Failure Analysis Businesses are created with the intention to be successful, achieve goals, and create profits. The continuity of business success depends on the capability to forecast changes on markets and economies, and create a plan to adapt to change, if management failure to forecast changes, the business welfare will be unstable. Blockbuster was a leader on the movies rental business, and failure to reinvent as company, leading to failure. Business Failure Analysis determined Blockbuster’s vision and mission, indicators of the business failure and success from research, how organizational behaviors lead company’s failure, and how the role of leadership, management and culture of the organization in business failure. Business Failure Analysis explained techniques that Blockbuster must used to prevent the impending failure, identified potential barriers during the change process, evaluated the power and political issues within the organization, and described the steps followed to implement the organizational change based on John Kotter’s 8-step plan for implementing change. BUSINESS FAILURE ANALYSIS Blockbuster Inc. was an American-based home movie rental provider, and at its peak in the 2000’s had up to 60,000 employees and more than 9,000 stores. Companies objectives were achieved, become number one movie rental provider in United States of America, and spread their branch thru the world with...
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...Team B - Business Failure Analysis Jeffery Rhymes, Terri Zubrod, Abel Dominguez, Eric Paniagua, Su Rodriguez LDR/531 January 11, 2015 Professor David Warren Introduction The mission statement for Redbox and Blockbuster both have focused on providing customer satisfaction with media entertainment that includes movies and games. In the years prior to the inception of Redbox in 2002, Blockbuster offered customers a value price entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience (Poggi, 2010). Blockbuster Inc. was a global business with 8,000 stores and offered movie and game rentals for home use by consumers (Poggi, 2010). Since 1992, Outerwall LLC had looking for ways to provide value, convenience and simplicity to consumers and retailers with the kiosk brands best known, Coinstar a leader in money services and Redbox, the best value in home entertainment. Outerwall LLC has a network of more than 66,000 kiosks and will be re-imagining new retail solutions to fit everyday consumer needs for the present and the future (Outerwall.com, 2015). Blockbuster – Success and Failure Blockbuster’s vision Statement: "At Blockbuster, diversity means valuing differences. It's a corporate value that must be continually developed, embraced and incorporated into the way we do business" (Poggi, 2010). Blockbuster was a video rental store that started in Dallas, Texas the first store was opened in October, 1985 and the...
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...Market Failures in Movies Rentals Katelyn Cuffle Microeconomics April 12, 2014 In today’s economy the technological advancements and market shifts have taken a toll on big businesses all over. Blockbuster, one of the well known movie stores suffered because it couldn’t keep up with the fast moving market shift in using new technology to rent movies on demand and now they are closed. The purpose of this report is to inform readers about market failures that happen when new technological advancements take over. Next this report discusses how adjusting to market shifts affect businesses. Finally this report discusses a solution that could help solve the problem for stores that can’t generate enough customers to come in because of technology. In the past couple years we have seen the “industry entertainment and media giants lose revenue as young upstart companies (or larger ones with visionary leaders) leverage the capabilities of the Web to outperform them. And now we're watching them go bankrupt as they fail to reinvent their business models to counterbalance the distribution of information online (Welchman, 2010).” Blockbuster is a well known business who because of the new technology advancements like ordering movies from your television and having Netflix went bankrupt. In today’s economy technology is...
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...The Closing of Blockbuster Video’s Stores The Closing of Blockbuster Video’s Stores Hanna, Peter Southern New Hampshire University OL-500 Hanna, Peter Southern New Hampshire University OL-500 Abstract: With increasing competition and the growth of technology, it is important that organizations maintain focus on an innovative and clear strategic direction as well as always striving for customer satisfaction. There are four major issues, inefficient and arrogant strategic direction, customer dissatisfaction, fiscal irresponsibility and a lack of innovation that ultimately led to the demise of the video rental “Kingpin” also known as Blockbuster Video. Introduction: Organizational strength relies on its infrastructure and strategic management. The study of organizational behavior within any organization is intriguing. Success relies on many factors that involve leadership, strategic vision and a motivated team poised for the challenges of the day to day operations of the organization. Blockbuster Video skyrocketed to the top of the movie entertainment empire. A Leader in the entertainment industry, Blockbuster Video was plagued by challenges and failures that eventually led to their ultimate demise after a short lived 25 years. This research paper will attempt to answer how the King of the video entertainment empire withered away, even after years of company acquisitions and finally merging with Dish Network. Blockbuster Video faced fierce competition...
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...Failure Analysis/Change Strategy LDR/531 October 27th, 2014 Professor Timothy De Long Failure Analysis/Change Strategy Introduction Comparing and contrasting failing and thriving businesses provides insight into best business practices. Examining a failed company, Blockbuster, and a successful company, Intuit, offers an opportunity to learn from managerial mistakes and triumphs. Failure and Success Blockbuster Inc. is an example of a failed business. Their updated mission, objectives, and vision were altered too late to keep up with the changing demand for convenient internet streaming videos. The company stated their “mission is to provide our customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution channels such as our stores, by-mail, vending and kiosks, online and at home. We believe Blockbuster offers customers a value-prices entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience" (Farfan, 2014 Blockbuster's Mission Statement). Their vision was to “provide our customers with the most convenient access to media entertainment delivered through multiple channels…. Offer customers a value-prices entertainment experience… broad product depth… with local neighborhood convenience” (Blockbuster Goes Bust – Outfoxed by Redbox, Licked by Netflix," 2014, para.8). The updated objectives were reasonable but were implemented...
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...Failure Analysis/Change Strategy LDR/531 October 27th, 2014 Professor Timothy De Long Failure Analysis/Change Strategy Introduction Comparing and contrasting failing and thriving businesses provides insight into best business practices. Examining a failed company, Blockbuster, and a successful company, Intuit, offers an opportunity to learn from managerial mistakes and triumphs. Failure and Success Blockbuster Inc. is an example of a failed business. Their updated mission, objectives, and vision were altered too late to keep up with the changing demand for convenient internet streaming videos. The company stated their “mission is to provide our customers with the most convenient access to media entertainment, including movie and game entertainment delivered through multiple distribution channels such as our stores, by-mail, vending and kiosks, online and at home. We believe Blockbuster offers customers a value-prices entertainment experience, combining the broad product depth of a specialty retailer with local neighborhood convenience" (Farfan, 2014 Blockbuster's Mission Statement). Their vision was to “provide our customers with the most convenient access to media entertainment delivered through multiple channels…. Offer customers a value-prices entertainment experience… broad product depth… with local neighborhood convenience” (Blockbuster Goes Bust – Outfoxed by Redbox, Licked by Netflix," 2014, para.8). The updated objectives were reasonable but were implemented...
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...Business Failure Enron xxxxxxxxxx University of Phoenix Online February xx, xxxx xxxxxxxxxxxx Examining a Business Failure: Enron This paper will discuss the contributions of leadership, management, and organizational structures that led to the demise of Enron. The structures will also be compared and contrasted to help better understand why the company failed. Enron Corporation was founded in Omaha Nebraska 1985 and was defunct on December 2, 2001. In the year 2000 Enron had published revenues of $101 billion and employed approximately 22,000 employees. The Company’s founder and CEO was Kenneth Lay Other notable people who lead Enron where Jeffery Skilling, Andres Fastow, Rebecca Mark-Jusbasche. Fortune magazine nominated Enron as “Americas Most Innovative Company” for six consecutive years. At the end of 2001 it was discovered that Enron had been creatively distributing its debt through fraudulent planned Accounting making the company seem very profitable in previous years ("Enron", 2012). Leadership, Management, and Organizational Structures (contributed to the failure) Leadership has many different definitions; one definition is “the behavior of an individual directing the activities of a group toward a shared goal. (Hemphill & Coons, 1957, pg 7). This definition is closely is related and applies to Enron’s leadership, Management and structure. Enron’s leadership...
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...Blockbuster Videos Environmental Impact Analysis Once considered the leader in the video rental industry, Blockbuster Videos now finds the business in a downward spiral and is now in the process of filing for Chapter 11 reorganization. Most of the stories about the demise of Blockbuster focused on Netflix and the move to digital technology, but the underlying reason Blockbuster failed was a lack of strong and credible leadership. While battling against its external environment such Redbox and Netflix, Blockbusters was also dealing with internal power struggles from top executives. From an external standpoint, there were several factors that led to Blockbuster’s decline. First, DVD costs declined substantially through increased economies of scale and reduced manufacturing costs. This led to a lower price for DVDs and had many consumers buying the videos outright, instead of opting to rent. Second, rental copies were expensive for Blockbuster to manage, which is why most of the company’s revenue came from late fees on returns. In addition, these DVD rentals are only made once and are costly to replace if lost or stolen. Third, large retail chains, such as WalMart, started to sell DVDs below wholesale, further diluting the market. However, despite all of these threats, the one external threat that had the largest impact was Netflix. Netflix stole market share by combining video sales with on-demand streaming videos at a fraction of the cost. Not only...
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...that goes into creating a business and even greater effort to make it successful. Before opening a business, owners are obligated to keep fresh, open ideas, have good management, and being able to financially sustain their business. Even this may not be enough to create a striving, successful business. There are many factors that go into whether a business is successful or a failure. One of the main reasons why small businesses fail is because of the owners/entrepreneurs themselves. This mainly goes for poor management skills that bring businesses to their demise. Owners who are stubborn, greedy, and self-righteous often don’t do what’s best for the company but choose what they think is the best. Also, owners who cannot operate their business financially are another reason for failure. Making mistakes such as paying too much in expenses including labor, rent and materials also factor into business failure. Businesses that don’t succeed often have poor accounting meaning there’s no organization of where the money comes and goes, and failure to have a backup plan financially. Another main reason for failure is not giving the people what they want. Entering a market that has low or no demand for their product is bad business planning. Advances in technology and a declining market also factor into the downfall of businesses. One of the main reasons why small businesses succeed is proper and efficient management. Being able to manage the finances, time, and people’s needs are all...
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...* Should Blockbuster have known that dramatic change to their Business Plans would be necessary? Blockbuster didn’t have a technology problem, because digital distribution was minimal, but rather a customer problem. It gave customers no reason to visit stores in lieu of the latest and greatest hit. (www.forbes.com/.../the-internet-didnt-kill-blockbuster-the-compa... Forbes Nov 8, 2013) * When should they have sensed or perceived a change to their business would be necessary? Lack of ease of accessibility and higher prices in connection to other video rental outlets. Blockbusters main competitors such as Netflix, Redbox, and many On Demand services seem to have a much better grasp of the importance of instant access at a lower price. (Blockbuster Inc. (SWOT analysis). http://www.yousigma.com/comparativeanalysis/blockbusterinc.html) * When should they have innovated or changed their plans to comprehend the perceived changes? Blockbuster’s biggest mistakes were that it failed to modernize its business strategy to include a multi-channel avenue for its customers to decide how they wanted to rent movies. Movie renters were and still are moving away from the traditional format of renting movies. Failure to adapt to changing consumer behavior and new technology helped companies like Netflix and Redbox gain considerable ground in the video rental industry. * What should they have considered when looking at their Porter’s Model? What do you think kept them from making...
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...Identify the most vital areas for change Blockbuster had numerous areas for change beginning with their upper management, because as a leader in a top company they must be prepared for change. With the ever changing demographics of an organization Blockbuster should have been able to change with the competition, faster technology, and change with the times. The bottom line is in order to survive Blockbuster needed to change the direction of how they do business. This means they should have went away from the walk in buildings for rentals and gone with an online or email movie rental service. As a result the leaders of an organization needs to be aware of the every day changes and competitive companies in the business coming up. They should change with the times and make the adjustment the company needs in order to not only survive but continue being a competitive company. Unfortunately Blockbuster did not make the changes necessary in time to survive the competition at the end Blockbuster was a victim of its own failure to change. As in all businesses Blockbuster should be able to adjust and expect changes in order to continue being competitive. Evaluate the power and political issues within the organization and describe how you will address these issues Once the power and political issues have been evaluated the issues must be addressed. The issues that need to be addressed is the change with technology. The leaders of the organization should have changed with the times...
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