Tuesday, October 28, 2008

Brother can you spare a dime?: Blockbuster makes change

James W. Keyes, Chairman and Chief Executive

Creating Value by Making Change

  • Former CEO of 7-11
  • The demise of Blockbuster has been greatly exaggerated
  • A demonstration of change...the 45 rpm record adapter. [Record stores, huh?]
  • People think Blockbuster is going the way of record stores...the stores are a strength, not a millstone.
  • How are 7Eleven and Blockbuster the same? New competitors have emerged to fulfill the changing needs of customers. 
  • But technology enabled 7-11 to customize the items offered in each store in a way that enabled more efficient retailing by looking at store data. 
  • Blockbuster started with the idea as a convenience store for entertainment. 
  • Originally, Blockbuster didn''t even sell DVDs...because the model was rental. [and it's tough for a mature company to think different].
  • Change required adapting to consumer needs...now Blockbuster will sell OR rent.
  • Why Blockbuster? The opportunity to change. [Another Apple example...some forget that Apple needed to change in the late 90s...it was the introduction of the iPod that built the change momentum]
  • The New Blockbuster: Reinventing the idea of convenient entertainment. 
  • Step 1: Name change...it's Blockbuster Media. Not Blockbuster Video.
  • Step 2: Offering Rental, Purchase, Trade-in
Convenience and the Blockbuster Business Model
  • DVDs are convenient because they are portable [yes, but so is a wireless broadband network]
  • People won;t want to be tethered to a single TV such as set top boxes [again, wireless broadband or satellite aren;t tethered].
  • Subscriptions: will be older stuff...not the newest. [I think this is wishful thinking...if you have hot content, you want it on as many networks as possible...what's a cable subscription afterall?]
  • Blockbuster is pursuing a subscription model too, however.
  • Canbe the only company that can go across all channels--store, online, set top-- [does this make them a distribution network? it would seem the reasonable definition of Blockbuster now... the difficulty is getting the physical presence weighting right since brick and mortar cost more than electrons].
  • The instore challenge: fixing the supply chain to have adequate supply of the films people want in store...for rent or buy. 
  • Bringing in gaming: Rock The Block campaign to highlight video games and promotion of games like Rockband and Guitar Hero.
  • Putting Coca Cola cafes in stores to combat low volume days.
  • Stocking hardware...offering Blue Ray hardware for purchase in store...devices for online download...gaming systems.
  • Licensing products: Merchandise associated with films (posters, toys, apparel).
  • Vending and Digital Kiosks: a kiosk that can link to blockbuster.com and in an airport load content onto a Flash Memory card (competing with Redbox).
  • Blockbuster is trying to out-convenience Netflix by mail and Redbox in vending and own the instore experience.
  • And unlike Apple and others who are tethering you to one device, Blockbuster is pursuing aggregated digital rights management for multiple devices...independent of platform [A huge opportunity precisely because it is so daunting in a world of open standards and competition].
[The new ad...gotta say its a classic example of brand advertising and it leaves me cold. Tell me why I should care but don;t tell me its cause you're telling me.]

Audience questions:
  • Are you getting ahead of your consumers with some of your new things (e.g., kiosks)? I don;t worry about getting ahead because they are learning...do have to worry about getting ahead of the investors. Which is why they havent built a settop box yet.
  • What was the logic behind the Circuit City acquisition (and others)? Generally prefers partnering. Acquiring a subscriber to movie service happens at the retail purchase. The thought is to be there at the purchase of the hardware...not as a separate and later attempt. Try to create a technology-agnostic store for media, hardware, software and service (like Apple Store but without the limit of one brand).
  • Best practices for buy online/pick up instore? Key comes down to not physical versus digital but viewing the cusotmer relationship as central...when you access, wherever you choose to do it, you are identified and have one relationship independent of the platform.

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