WEBVTT - The Birth of Blockbuster 0:00:04.120 --> 0:00:07.160 Get in touch with technology with tech Stuff from how 0:00:07.200 --> 0:00:13.880 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:13.880 --> 0:00:17.120 I'm your host, Jonathan Strickland. I'm an executive producer with 0:00:17.239 --> 0:00:20.440 how Stuff Works in a love all things tech, and 0:00:20.560 --> 0:00:25.040 it's time to start a new short series series by 0:00:25.200 --> 0:00:27.560 two episodes. That's not really a series, I guess. Tech 0:00:27.560 --> 0:00:29.880 Stuff listener Paul asked that I would do if I 0:00:29.920 --> 0:00:33.480 would do an episode about Blockbuster, the mega chain video 0:00:33.560 --> 0:00:37.160 rental store that at one point had more than nine 0:00:37.240 --> 0:00:41.760 thousand locations worldwide. I'm instead gonna do two episodes on 0:00:41.880 --> 0:00:45.159 the company. This episode is called the Birth of Blockbuster, 0:00:45.280 --> 0:00:48.720 and spoiler alert, the title of the next episode is 0:00:48.880 --> 0:00:53.239 the Death of Blockbuster. So this is gonna be all 0:00:53.240 --> 0:00:55.640 about the founding of Blockbuster and its rise to dominate 0:00:55.640 --> 0:00:58.160 the video rental industry. And the next one is what 0:00:58.280 --> 0:01:01.080 the heck happened? Right? How did it? How did things 0:01:01.120 --> 0:01:07.000 go so wrong for Blockbuster that today only one Blockbuster 0:01:07.200 --> 0:01:10.720 video store exists in the United States, though I should 0:01:10.720 --> 0:01:12.520 say there are a few others that are actually an 0:01:12.520 --> 0:01:17.440 overseas locations, but only one US Blockbuster remains. So we're 0:01:17.440 --> 0:01:19.840 going to find out together. Let's dive right in and 0:01:19.880 --> 0:01:24.679 stop delaying. Wow, what a difference. Well, to understand the 0:01:24.760 --> 0:01:27.640 rise of Blockbuster, we need to look back at the 0:01:27.680 --> 0:01:32.000 development of the rise of the VCR. Sony's Beta Max 0:01:32.080 --> 0:01:36.119 and j VCS VHS standards debuted in the nineteen seventies, 0:01:36.280 --> 0:01:39.880 and both formats used magnetic tape to store video content, 0:01:40.160 --> 0:01:42.880 and they were incompatible with one another, so you could 0:01:42.920 --> 0:01:45.960 not put a Beta Max tape in a VHS VCR. 0:01:46.640 --> 0:01:49.920 They also were enormous disruptors. You know, we talked about 0:01:49.920 --> 0:01:56.880 disruptive technology. Videotapes were huge and disruptive. Media companies hated 0:01:57.240 --> 0:02:01.120 the idea of video tapes. They tried to stop the technology. 0:02:01.160 --> 0:02:04.320 They were worried that people would have the ability to 0:02:04.400 --> 0:02:07.280 tape content right off their televisions and then that would 0:02:07.320 --> 0:02:10.520 somehow eat up into their revenue, maybe there'd be piracy issues. 0:02:11.320 --> 0:02:13.720 It was just a big scare. And in fact, we 0:02:13.760 --> 0:02:15.760 see this all the time. Whenever there was a new 0:02:15.800 --> 0:02:20.720 media format that would allow people to put media onto 0:02:20.840 --> 0:02:24.960 some sort of storage device, we've seen companies react negatively, 0:02:25.360 --> 0:02:29.480 whether it's CDs, DVDs, whatever, And the same was true 0:02:29.680 --> 0:02:33.360 way back in the seventies with VHS and Beta Max. 0:02:33.840 --> 0:02:37.000 The first film to be released on VHS, meaning you 0:02:37.040 --> 0:02:40.320 could go and purchase a copy of the movie on 0:02:40.480 --> 0:02:44.200 VHS in the store would be a South Korean movie 0:02:44.320 --> 0:02:47.480 called The Young Teacher that became available way back in 0:02:47.560 --> 0:02:52.000 nineteen seventy six, but America wouldn't start having access to 0:02:52.520 --> 0:02:58.440 VHS tapes until nine. A company called Magnetic Video had 0:02:58.480 --> 0:03:02.160 a great idea. Well, the owner of Magnetic Video, Andre Blair, 0:03:02.280 --> 0:03:05.160 he had a great idea. He said, I'm gonna license movies. 0:03:05.560 --> 0:03:07.800 I'm gonna go to a movie studio. I'm going to 0:03:07.880 --> 0:03:12.200 pay a licensing fee and UH in return, I will 0:03:12.320 --> 0:03:17.880 end up producing videotapes of that studio's library of content. 0:03:19.120 --> 0:03:22.600 And ZI lands a deal with twentieth Century Fox, and 0:03:22.680 --> 0:03:27.040 the agreement was that Blay would pay a licensing fee 0:03:27.040 --> 0:03:30.400 of seven dollars and fifty cents per video that he 0:03:30.480 --> 0:03:34.079 sold and also give a three dred thousand dollar upfront 0:03:34.120 --> 0:03:38.880 advance to twentie century Fox. Magnetic Video had an organization 0:03:39.000 --> 0:03:42.400 called the Video Club of America that had a membership 0:03:42.440 --> 0:03:45.600 fee of ten dollars, and through that club you could 0:03:45.640 --> 0:03:50.640 purchase movies like Patent Mash, Hello Dolly, The Sound of Music, 0:03:50.720 --> 0:03:53.520 and The French Connection, among others. But the cost of 0:03:53.640 --> 0:04:01.120 every video was forty cents. Parently, some seven dollars and 0:04:01.120 --> 0:04:04.200 fifty cents would go to twenty century Fox and the 0:04:04.280 --> 0:04:07.280 rest would be divvied up between you know, Andrea Blay 0:04:07.320 --> 0:04:11.200 and whatever the expenses were. By the December of nineteen, 0:04:12.840 --> 0:04:16.599 an entrepreneur named George Atkinson got a crazy idea. He 0:04:16.640 --> 0:04:19.640 had already run a home theater system business, but now 0:04:19.640 --> 0:04:23.039 he thought, what if I bought copies of these movies 0:04:23.160 --> 0:04:25.800 and then offered them as rentals to people who own 0:04:25.920 --> 0:04:30.960 VCRs and Beta Max machines. I could get a lot 0:04:30.960 --> 0:04:32.760 of money. This way, I can generate a lot of revenue. 0:04:33.040 --> 0:04:36.279 It's gonna take a big upfront cost because you have 0:04:36.320 --> 0:04:38.359 to build out the inventory. You have to pay for 0:04:38.400 --> 0:04:44.279 all those videotapes. But then over uh sequence of rentals, 0:04:44.839 --> 0:04:47.920 for a low amount per rental, you can start making 0:04:47.920 --> 0:04:50.520 that money back. You you make back your investment and 0:04:50.560 --> 0:04:54.120 you start making a profit. Atkinson opened up a six 0:04:54.360 --> 0:04:58.840 d square foot storefront he called Video Cassette Rentals and 0:04:58.960 --> 0:05:01.599 he would later rename the Video Station. It was on 0:05:01.640 --> 0:05:05.640 Wilshire Boulevard in Los Angeles, California, and that's when the 0:05:05.720 --> 0:05:11.080 video rental business was born. Atkinson was a pioneer in 0:05:11.120 --> 0:05:15.440 this space, and he would even franchise his idea. He 0:05:15.440 --> 0:05:20.280 would license that out to other small business owners. Now, 0:05:20.279 --> 0:05:24.800 the media companies again hated this idea, but the license 0:05:24.839 --> 0:05:28.919 agreements they had made for videotapes they were intended for 0:05:29.040 --> 0:05:32.320 home sale, right, they were meant for the home theater 0:05:32.480 --> 0:05:36.800 enthusiast to go out and purchase a fifty dollar videotape 0:05:36.839 --> 0:05:40.640 of a movie. But copyright law was pretty clear there 0:05:40.720 --> 0:05:44.440 was nothing illegal about what Atkinson was doing. He was 0:05:44.560 --> 0:05:48.240 his rental business did not violate any laws. So while 0:05:48.240 --> 0:05:51.520 the movie studios didn't like the idea, they couldn't legally 0:05:51.560 --> 0:05:55.719 stop it. Later on, those same studios would totally come 0:05:55.720 --> 0:06:00.560 around to this rental industry. It would become an lucrative 0:06:00.720 --> 0:06:04.360 revenue source. But of course, at first it was brand new, 0:06:04.839 --> 0:06:08.560 and as we all know, big companies hate new things. 0:06:09.120 --> 0:06:13.000 They're scary. And across the United States, other entrepreneurs would 0:06:13.040 --> 0:06:16.440 follow Atkinson's lead. Some of them were independent mom and 0:06:16.480 --> 0:06:22.279 pop stores, so little, local neighborhood video rental facilities. And 0:06:22.320 --> 0:06:24.480 then one guy would start up a business that would 0:06:24.480 --> 0:06:29.040 become the giant of this burgeoning industry. Now that one 0:06:29.080 --> 0:06:33.320 guy's name might surprise you, because when you talk about Blockbuster, 0:06:33.800 --> 0:06:36.599 one name tends to pop up more frequently than others. 0:06:36.600 --> 0:06:40.960 There was a billionaire named Wayne Huizenga, and he made 0:06:41.000 --> 0:06:45.159 his fortune growing Blockbuster and then ultimately sold it to 0:06:45.279 --> 0:06:47.320 Viacom in the nineties, which I will cover in our 0:06:47.320 --> 0:06:49.800 next episode, and we will get to him. He is 0:06:49.839 --> 0:06:54.160 a crucial part of Blockbusters history, but he was not 0:06:54.279 --> 0:06:57.960 the person who started the chain. That honor goes to 0:06:58.000 --> 0:07:02.640 a guy named David Cook of Dallas, Texas. David Cook 0:07:02.720 --> 0:07:05.440 was a programmer and an entrepreneur, and in nineteen eighty 0:07:05.480 --> 0:07:09.280 two he founded a company called Cook Data Services, and 0:07:09.760 --> 0:07:13.720 this company built databases and software and some hardware tools 0:07:14.120 --> 0:07:19.080 for the petroleum industry. His company, UH was doing pretty well, 0:07:19.120 --> 0:07:21.600 but then the oil business as a whole, the whole 0:07:21.680 --> 0:07:25.239 industry took a huge hit in the early nineteen eighties, 0:07:25.760 --> 0:07:29.200 and so Cook started to look around for other opportunities. 0:07:29.280 --> 0:07:31.680 It was clear that the oil industry was not going 0:07:31.760 --> 0:07:35.680 to be a reliable source of revenue. His wife, Sandy, 0:07:35.960 --> 0:07:39.120 loved film, and she said, maybe you should look into 0:07:39.560 --> 0:07:43.840 video rental operations because we're starting to see these businesses 0:07:43.880 --> 0:07:45.800 pop up, and I think you could probably do a 0:07:45.840 --> 0:07:48.440 really good job with it. So Cook began to do research. 0:07:48.480 --> 0:07:51.160 He began to look into the business of video rentals, 0:07:51.600 --> 0:07:54.520 and he saw that most video stores were actually pretty 0:07:54.520 --> 0:07:58.520 small operations. They were limited to an inventory that represented 0:07:58.560 --> 0:08:02.040 some of the biggest move be titles because the cost 0:08:02.120 --> 0:08:05.880 per video was pretty high, so it was prohibitively expensive 0:08:05.920 --> 0:08:09.400 to aim for a really large inventory spanning niche genres 0:08:09.400 --> 0:08:11.640 and interests. Right, Like, if you sit there and say 0:08:11.680 --> 0:08:15.360 to yourself, well, E T is going to be huge, 0:08:15.480 --> 0:08:17.920 so I want to make sure that we have plenty 0:08:17.920 --> 0:08:19.960 of copies of ET. That's a bad example because of 0:08:19.960 --> 0:08:21.320 how long it took a t to get to the 0:08:21.320 --> 0:08:23.880 home video Marcord. But just assume that we're talking about 0:08:23.960 --> 0:08:28.000 something that was available in so you say, I want 0:08:28.000 --> 0:08:29.280 to have a whole bunch of copies of that because 0:08:29.320 --> 0:08:32.800 it's a big, big name. But there's this other smaller film. 0:08:32.880 --> 0:08:35.400 Maybe let's say it's a racer head. You know, it's 0:08:35.400 --> 0:08:37.800 a David Lynch movie and people have heard about it, 0:08:37.800 --> 0:08:39.680 but most people think of it, Oh, that's that weird 0:08:40.440 --> 0:08:42.760 art house kind of film, and I don't understand it. 0:08:42.760 --> 0:08:46.880 It's very independent and strange and surreal and absurd, and 0:08:46.920 --> 0:08:50.240 I don't. That's not for me. And so a lot 0:08:50.280 --> 0:08:54.200 of these video rental stores would ignore those other titles 0:08:54.360 --> 0:08:57.760 and just focus on the really big, most recent ones. 0:08:58.360 --> 0:09:02.400 But Cook thought there might be a way of appealing 0:09:02.400 --> 0:09:06.800 to a broader audience by including those titles. He also 0:09:06.880 --> 0:09:08.920 knowed that a lot of video stores had a pretty 0:09:08.920 --> 0:09:13.840 clunky way of actually renting titles. Movies typically would not 0:09:13.920 --> 0:09:17.200 be kept on shelves because there was a very legitimate 0:09:17.240 --> 0:09:20.520 fear that customers might come in, see a video tape 0:09:20.520 --> 0:09:24.640 on the shelf, get some sticky fingers, slip that video 0:09:24.800 --> 0:09:27.000 cassette into a bag, and just walk right on out. 0:09:27.080 --> 0:09:28.920 And then next thing you know, they have the latest 0:09:28.960 --> 0:09:34.400 copy of the most recent releases. And so that was 0:09:34.440 --> 0:09:39.360 something that you typically wouldn't see in your normal video 0:09:39.400 --> 0:09:41.480 rental stores. You would you might see cases, but there'd 0:09:41.480 --> 0:09:43.600 be no videotapes inside. You would have to take it 0:09:43.640 --> 0:09:46.600 out to the desk and then they would have to 0:09:46.600 --> 0:09:50.280 go find a copy of that movie and they would 0:09:50.320 --> 0:09:52.839 have to do the whole checkout process, which typically was 0:09:52.880 --> 0:09:55.600 not automated. It was laborious. It was slow. It was 0:09:55.640 --> 0:10:00.760 not good customer experience. So David Cook asides, He's going 0:10:00.800 --> 0:10:02.719 to take a stab at this, and he opens up 0:10:02.880 --> 0:10:06.679 what would become the first Blockbuster video rental store. This 0:10:06.760 --> 0:10:10.120 was still under the umbrella of his company, Cook Data Systems. 0:10:10.679 --> 0:10:13.760 He bought an inventory of movies and opened a store space, 0:10:13.880 --> 0:10:19.120 and that inventory included eight thousand tapes, which represented six thousand, 0:10:19.240 --> 0:10:23.560 five hundred different titles. And remember each of those is 0:10:23.640 --> 0:10:26.560 costing quite a bit of money per go. We're talking 0:10:26.600 --> 0:10:30.280 like around fifty bucks per tape, sometimes sixty depends on 0:10:30.280 --> 0:10:34.120 the title in the movie studio. But you multiply that 0:10:34.120 --> 0:10:36.079 by eight thousand, that's a lot of money. But he 0:10:36.120 --> 0:10:38.560 gave his store a much larger selection than most other 0:10:38.600 --> 0:10:42.560 stores and was significantly bigger to the competitor that was 0:10:42.960 --> 0:10:46.720 geographically closest to him, So he had an incredible advantage 0:10:46.760 --> 0:10:50.680 just from an inventory perspective. Cook also would outfit every 0:10:50.679 --> 0:10:54.240 single tape with a special magnetic strip, and he mounted 0:10:54.320 --> 0:10:57.400 sensors near the door of his shop to discourage theft. 0:10:57.440 --> 0:11:01.040 So if you took the tape through the sensors, an 0:11:01.040 --> 0:11:04.040 alarm would go off and Cook would know, or his 0:11:04.080 --> 0:11:07.000 employees would know that someone was trying to lift one 0:11:07.000 --> 0:11:11.000 of those videotapes. And I remember this set up vividly 0:11:11.080 --> 0:11:13.760 because I remember you would go to rent the tapes 0:11:14.160 --> 0:11:17.520 and the process would have the clerk actually put the 0:11:17.600 --> 0:11:22.000 video tape on the other side of the sensors, on 0:11:22.200 --> 0:11:24.200 their side of the counter, so you'd have to, you know, 0:11:24.280 --> 0:11:27.840 you'd have to complete your transaction, walk through the sensors, 0:11:28.320 --> 0:11:30.600 pick up your movie, and then you could leave. So 0:11:31.240 --> 0:11:34.840 good times that still it was still in in uh 0:11:34.880 --> 0:11:37.160 in place when I was renting movies or when my 0:11:37.200 --> 0:11:41.520 family was renting movies in the late eighties. He also 0:11:41.559 --> 0:11:44.719 incorporated a database that could actually keep track of all 0:11:44.720 --> 0:11:47.720 the rental titles, so pulling a title up on the 0:11:47.760 --> 0:11:50.560 system would tell you immediately where it was, whether it 0:11:50.640 --> 0:11:53.200 was out for rent, or if it should be in 0:11:53.240 --> 0:11:56.200 the store, so he could keep track of where everything 0:11:56.320 --> 0:11:57.880 was at any given time. It also meant that he 0:11:57.920 --> 0:12:02.000 could see which titles were getting rented more frequently, and 0:12:02.080 --> 0:12:05.520 if necessary, he could order another copy of a title 0:12:05.800 --> 0:12:10.360 if it was proving to be incredibly popular and consistently 0:12:10.480 --> 0:12:13.800 checked out. Checking out titles was actually computerized and automated 0:12:13.800 --> 0:12:16.040 as well. That was a huge advantage over other video 0:12:16.080 --> 0:12:19.640 rental stores. So a customer would first have to become 0:12:19.679 --> 0:12:23.600 a member of the store. You couldn't just rent anything. 0:12:23.679 --> 0:12:27.079 You had to first apply for a membership card, and 0:12:27.440 --> 0:12:29.960 you would get a membership card for you'd pay a 0:12:30.000 --> 0:12:32.360 fee get a membership card has a unique barcode on 0:12:32.400 --> 0:12:35.720 it that's tied to your account, so you have a 0:12:35.760 --> 0:12:40.280 customer profile, and whenever you scan your membership card, it 0:12:40.720 --> 0:12:44.560 links whatever transaction you are doing to your customer profile 0:12:44.800 --> 0:12:48.400 in Cook's computer system. And every videotape would also have 0:12:48.559 --> 0:12:50.920 its own barcode. So if you wanted to check out 0:12:50.920 --> 0:12:52.920 a video, you bring it up to the front, the 0:12:53.000 --> 0:12:55.800 clerk would scan your card, they would scan the video. 0:12:55.920 --> 0:13:00.960 This links the video to your profile. It tells the system, hey, 0:13:01.040 --> 0:13:04.800 Jonathan has rented Big Trouble in Little China for the 0:13:04.800 --> 0:13:08.080 eightieth time. So Jonathan's got Big Trouble in Little China 0:13:08.760 --> 0:13:11.080 on rent, and we know what's going to be due 0:13:11.200 --> 0:13:13.319 in X number of days. So that way they could 0:13:13.320 --> 0:13:16.080 actually keep track of all that information to and it 0:13:16.120 --> 0:13:19.360 meant that if you kept the movie longer than what 0:13:19.679 --> 0:13:23.360 the membership agreement allowed you to, you'd end up having 0:13:23.400 --> 0:13:26.360 to pay late fees which would become a very important 0:13:26.400 --> 0:13:29.160 part of Blockbusters revenue model. As it turns out, the 0:13:29.200 --> 0:13:33.680 business was a smash success. According to Cook, the night 0:13:33.720 --> 0:13:36.560 they opened, they had to close off and lock the 0:13:36.640 --> 0:13:39.520 doors to limit the number of people who are coming 0:13:39.520 --> 0:13:42.360 in and overcrowding the store. Cook found that people were 0:13:42.360 --> 0:13:44.760 really eager to rent all sorts of movies, not just 0:13:44.840 --> 0:13:47.600 the big titles, but other ones as well. So he 0:13:47.720 --> 0:13:51.400 discovered that that prevailing wisdom that you should really focus 0:13:51.440 --> 0:13:54.240 on the latest releases didn't really hold true. That a 0:13:54.240 --> 0:13:57.600 lot of people were interested in watching older films, things 0:13:57.600 --> 0:13:59.840 that they had heard about but never seen, or maybe 0:13:59.840 --> 0:14:02.120 they had seen it years ago but it hadn't seen 0:14:02.160 --> 0:14:06.480 it since, he found that those smaller titles had real value, 0:14:06.679 --> 0:14:09.920 so it turned out that his approach was more effective. 0:14:10.360 --> 0:14:14.600 The following summer, in x Cook would open three more stores. 0:14:15.040 --> 0:14:17.960 Not even a year had gone by since he had 0:14:18.000 --> 0:14:20.320 opened the first one, and already he was ready to expand. 0:14:20.720 --> 0:14:24.520 He also changed the company over to become Blockbuster Entertainment Corporation. 0:14:24.640 --> 0:14:29.040 In June. Things were looking up and Cook was seeking 0:14:29.080 --> 0:14:31.080 investment in the form of an I p O to 0:14:31.360 --> 0:14:35.120 fund this expansion because it was expensive but Just a 0:14:35.160 --> 0:14:38.120 few days before the offering was to take place, a 0:14:38.120 --> 0:14:41.720 financial reporter did a piece on Cook. That piece was 0:14:41.800 --> 0:14:45.080 kind of a hatchet job. It highlighted how the oil 0:14:45.240 --> 0:14:49.800 industry failure nearly tanked his company just a few years earlier, 0:14:50.440 --> 0:14:53.880 and it questioned whether Cook had the expertise in the 0:14:53.960 --> 0:14:57.560 video field to make his business a real success. And 0:14:57.600 --> 0:15:01.120 it was such a damaging piece that it tanked that 0:15:01.200 --> 0:15:05.320 equity offering that was planned, and due to that expansion 0:15:05.440 --> 0:15:09.480 and the high upfront costs, the company ended six with 0:15:09.520 --> 0:15:14.320 a three point two million dollar shortfall. But the story 0:15:14.360 --> 0:15:17.320 obviously doesn't end there. It could have this could have 0:15:17.320 --> 0:15:19.440 been the end of Blockbuster, and we never would have 0:15:19.480 --> 0:15:24.120 talked about it. The name never would have risen beyond Dallas, Texas, 0:15:24.200 --> 0:15:26.400 and we would just be ignorant of it. But of 0:15:26.440 --> 0:15:28.680 course things did not go that way. I'll talk more 0:15:28.680 --> 0:15:31.560 about what happened in just a second, but first let's 0:15:31.600 --> 0:15:42.160 take a quick break to thank our sponsor. So here's 0:15:42.200 --> 0:15:45.920 Cook with a business he knows can be successful, but 0:15:45.960 --> 0:15:49.040 he's got a huge cash flow crisis on his hands. 0:15:49.480 --> 0:15:54.040 In February, Cook sells off one third of the company 0:15:54.120 --> 0:15:57.600 to a group of three investors, and all three were 0:15:57.640 --> 0:16:01.080 from another big company that Cook had some experience with 0:16:01.120 --> 0:16:04.960 in the past. It was a garbage disposal business of 0:16:05.000 --> 0:16:08.840 all things, and it was called Waste Management. Side note, 0:16:08.880 --> 0:16:11.640 I once tried to launch a fitness company called waste 0:16:11.720 --> 0:16:16.040 Management spelled slightly differently, but it never did very well. 0:16:16.160 --> 0:16:18.680 But the other Waste Management was a different story, had 0:16:18.680 --> 0:16:22.720 done really well, and one of their co founders was 0:16:22.720 --> 0:16:27.240 was the guy named Wayne Wizinga, and Waizinga had retired 0:16:27.440 --> 0:16:31.560 from Waste Management in four He and John Milk, who 0:16:31.640 --> 0:16:36.280 was the president of Waste Management's international division, and Donald Flynn, 0:16:36.400 --> 0:16:39.680 who was the CFO of Waste Management, all went in 0:16:39.720 --> 0:16:43.320 to invest in Blockbuster, pouring more than eighteen million dollars 0:16:43.400 --> 0:16:46.960 into the company. Cook ended up handing over control to 0:16:47.000 --> 0:16:51.000 the company to Whaizinga later on that year that it 0:16:51.200 --> 0:16:54.240 just was clear that he was not going to be 0:16:54.240 --> 0:16:58.200 able to hold onto the company and Cook's business strategy 0:16:58.920 --> 0:17:02.400 was not the way that Oizinga and his his partners 0:17:02.400 --> 0:17:05.679 wanted to go. Cook wanted to create a franchise system. 0:17:05.840 --> 0:17:08.440 He wanted to license his computer system he had created 0:17:08.480 --> 0:17:13.600 the database system and Blockbuster's name to independent entrepreneurs and 0:17:13.640 --> 0:17:16.400 that way, he wouldn't have to oversee all the operations. 0:17:16.480 --> 0:17:20.399 He could benefit from the licensing fees, and these small 0:17:20.840 --> 0:17:25.600 independent video store owners could benefit from the work he 0:17:25.640 --> 0:17:28.320 had done building out the database. But wa Zinga had 0:17:28.320 --> 0:17:31.119 a different idea. He wanted the company to maintain ownership 0:17:31.320 --> 0:17:35.520 of as many stores as possible with direct control. Cook 0:17:35.600 --> 0:17:38.960 reportedly had issues with the new leaders of Blockbuster, and 0:17:39.040 --> 0:17:41.560 by one report I saw, he had a hearty disagreement 0:17:41.600 --> 0:17:46.520 with one of Zinga's direct reports. I believe the piece 0:17:46.560 --> 0:17:51.480 I read called it one of Whizinga's lieutenants. So Cook 0:17:51.560 --> 0:17:53.439 decides he's going to get out of the game, the 0:17:53.440 --> 0:17:57.520 guy who founded the company. So in April, Cook sells 0:17:57.560 --> 0:18:00.800 off his shares of the company he founded and he 0:18:00.880 --> 0:18:04.679 goes to work on other businesses. Has pailed amounted to 0:18:05.040 --> 0:18:08.080 something in the area of around twenty million dollars, somewhere 0:18:08.119 --> 0:18:11.560 between eighteen and twenty million, which isn't bad. Obviously, that's 0:18:11.560 --> 0:18:13.800 a lot of money. I mean, it makes you a millionaire, 0:18:13.960 --> 0:18:18.040 a multimillionaire, But that was a fraction of what he 0:18:18.160 --> 0:18:21.280 could have made had he stuck around. However, based on 0:18:21.320 --> 0:18:23.359 a little bit of information I can find about Cook, 0:18:23.640 --> 0:18:27.200 who is a pretty private person overall. He did not 0:18:27.320 --> 0:18:30.280 regret his decision to leave when he did. For one thing, 0:18:30.560 --> 0:18:34.320 it didn't sound like money was of a super high 0:18:34.640 --> 0:18:37.520 priority in his life. Like sure, money is nice, it's 0:18:37.520 --> 0:18:40.600 good to have it, but he's not consumed with the 0:18:40.640 --> 0:18:43.960 idea of constantly making more money. He's appears to have 0:18:44.000 --> 0:18:48.119 more of an engineering bent, where he likes to recognize 0:18:48.160 --> 0:18:52.040 problems and find ways to solve them. So he leaves 0:18:52.040 --> 0:18:56.879 the company behind, and the founder has gone. By April seven, 0:18:56.920 --> 0:19:00.200 not quite two years after the company started in the 0:19:00.240 --> 0:19:03.560 first place, the new leadership decides to pick up stakes 0:19:03.600 --> 0:19:07.200 from Dallas and relocate to a new headquarters. The new 0:19:07.200 --> 0:19:12.000 home base of operations for Blockbuster would then be Fort Lauderdale, Florida, 0:19:12.320 --> 0:19:15.479 so they move out from Dallas to Fort Lauderdale. By 0:19:15.520 --> 0:19:18.280 the summer of nine seven, Blockbuster had grown into a 0:19:18.320 --> 0:19:23.160 company with fifteen of its own stores and twenty franchised stores. 0:19:23.560 --> 0:19:26.760 Some things would remain the same as when Cook ran things. 0:19:26.800 --> 0:19:29.879 The standard rental period was three days, which is what 0:19:30.080 --> 0:19:33.040 Cook had established. Stores would open at ten am, they 0:19:33.040 --> 0:19:35.520 would close at midnight. There was another thing that Cook 0:19:35.560 --> 0:19:38.399 had established, and people could rent more than one film 0:19:38.440 --> 0:19:41.119 at a time. Other interesting things that Cook had learned 0:19:41.640 --> 0:19:43.920 and that the new owners were able to leverage to 0:19:44.000 --> 0:19:48.280 greater effect held some surprising data. For one thing, seventy 0:19:48.359 --> 0:19:53.280 percent of rentals were of non hit films. There were 0:19:53.280 --> 0:19:56.439 movies that didn't receive a wide release, or some that 0:19:56.560 --> 0:19:59.679 received no theatrical release at all, and that encouraged the 0:19:59.680 --> 0:20:02.400 company to follow Cook's example and make sure that new 0:20:02.520 --> 0:20:05.359 video stores, whenever they would open one up, would have 0:20:05.400 --> 0:20:09.600 a broad spectrum of titles across all genres. To capitalize 0:20:09.640 --> 0:20:12.360 on that trend, the company also made it a practice 0:20:12.400 --> 0:20:16.080 to choose its locations very carefully. They would scout out 0:20:16.080 --> 0:20:19.560 potential neighborhoods, not just to find a good storefront space, 0:20:19.600 --> 0:20:21.280 you know, not just to say, oh, well, this this 0:20:21.400 --> 0:20:24.720 land real estate here is ideal for us. But also 0:20:25.160 --> 0:20:26.960 they wanted to get a really good understanding of the 0:20:26.960 --> 0:20:30.760 demographics of the neighborhood because that would influence the choices 0:20:30.840 --> 0:20:33.679 the company would make for the inventory held by that store. 0:20:34.000 --> 0:20:35.679 So if you go to a location and has a 0:20:35.760 --> 0:20:41.159 really large immigrant population, then you might include more foreign 0:20:41.200 --> 0:20:45.720 films that represent the demographics of that area better, so 0:20:45.800 --> 0:20:49.480 that if there's let's say there's a large Russian population 0:20:49.720 --> 0:20:51.800 in a town, you might want to try and get 0:20:51.840 --> 0:20:54.439 as much Russian cinema as possible because you're going to 0:20:54.520 --> 0:20:58.000 appeal to the folks who live in that area. And 0:20:58.119 --> 0:21:00.720 one of their big decision the company directors made was 0:21:00.800 --> 0:21:04.800 that the video store would not carry X rated films. Uh. 0:21:04.840 --> 0:21:08.560 They decided they definitely wanted a family friendly company, a 0:21:08.600 --> 0:21:12.639 family oriented business, so that was right out. And in 0:21:12.680 --> 0:21:16.399 the video rental days, there frequently were video rental stores 0:21:16.440 --> 0:21:19.919 that would have a a surreptitious curtain hung up in 0:21:19.960 --> 0:21:22.720 the store and behind that was where all the the 0:21:22.880 --> 0:21:26.480 X rated material was. Blockbuster said, we're not doing that 0:21:26.520 --> 0:21:29.760 at all. That's totally against what we're gonna stand for, 0:21:30.160 --> 0:21:34.560 so we won't even entertain that thought. And then Wazinga 0:21:34.720 --> 0:21:38.399 directed his new company to expand in that old, tried 0:21:38.600 --> 0:21:43.560 and true way by buying up competition. Why open new 0:21:43.640 --> 0:21:46.760 stores if you can buy existing ones. Although to be fair, 0:21:46.800 --> 0:21:50.480 Blockbuster did both. They didn't just go out and acquire 0:21:50.520 --> 0:21:53.320 other companies. They also opened up new stores of their own, 0:21:53.400 --> 0:21:57.920 but they did do quite a bit of acquisitions. So 0:21:58.119 --> 0:22:01.040 one thing that they started to do under Wazinga was 0:22:01.080 --> 0:22:04.400 to try and buy back franchised stores. So the goal 0:22:04.480 --> 0:22:07.680 was to reduce the number of franchises to of all 0:22:07.760 --> 0:22:11.600 Blockbuster stores, so the company would operate the other six directly. 0:22:12.200 --> 0:22:16.399 Wasazinga started acquiring regional chains of video rental stores, so 0:22:16.440 --> 0:22:18.840 he would look for chains that held a strong position 0:22:19.040 --> 0:22:21.440 in their local markets and then he would go out 0:22:21.480 --> 0:22:23.720 and buy those So that way, instead of having to 0:22:23.880 --> 0:22:28.880 go into a market and compete against an established uh rival, 0:22:29.400 --> 0:22:32.280 they buy out the potential rival from the beginning and 0:22:32.320 --> 0:22:36.600 then just take their place. So in March seven, Blockbuster 0:22:36.640 --> 0:22:40.000 bought out a chain called Southern Video Partnership. In May 0:22:40.000 --> 0:22:44.000 of that same year, they acquired Movies to Go Incorporated. 0:22:44.040 --> 0:22:47.240 And that was just the beginning. By the end of 0:22:47.359 --> 0:22:51.240 nineteen eight seven, Blockbuster had risen to become the fifth 0:22:51.480 --> 0:22:55.240 largest video chain by revenue and they operated one hundred 0:22:55.440 --> 0:22:59.920 thirty three stores. Wasazinga also planned for the future. Blow 0:23:00.119 --> 0:23:04.600 Buster built an enormous distribution center in Dallas. This huge 0:23:04.680 --> 0:23:08.240 warehouse building, and it was essentially a videotape warehouse. It 0:23:08.320 --> 0:23:10.760 held industry so that a store would be able to 0:23:10.880 --> 0:23:15.600 ramp up almost instantaneously. Essentially, Blockbuster would be able to 0:23:15.640 --> 0:23:19.359 choose a location for a new store, secure that location 0:23:19.760 --> 0:23:21.840 to a build out for the store, and as soon 0:23:21.880 --> 0:23:24.280 as it was ready they could stock it. They could 0:23:24.359 --> 0:23:27.399 fill the shelves because they had this big distribution center 0:23:27.880 --> 0:23:31.879 that held massive numbers of tapes that were representative of 0:23:31.960 --> 0:23:36.720 multiple stores worth of inventory. In March was Zinga led 0:23:36.760 --> 0:23:40.159 the charge to acquire another video rental company called Video 0:23:40.359 --> 0:23:44.640 Library Incorporated, which was based out of San Diego, California, 0:23:44.760 --> 0:23:48.440 and had forty three locations at the time of the acquisition. 0:23:48.600 --> 0:23:52.600 Blockbuster paid six point for million dollars in cash plus 0:23:52.640 --> 0:23:57.159 some stock, and then in April night Blockbuster partnered with 0:23:57.200 --> 0:24:01.159 a company called the United Cable Television Corporation or U 0:24:01.320 --> 0:24:04.800 See t C, and you See TC would help Blockbuster 0:24:04.920 --> 0:24:08.320