The Cooks discovere d that the public had a much greater appetite for renting video movie s than anyone had previously suspected. People were interested not ju st in seeing hit movies they had missed in the theaters but also in a broad variety of other features. By summer , Cook had expanded the Blockbuster concept to three ad ditional stores.
In September, the company set out to raise money for further exp ansion with an initial stock offering. Days before the sale was to ta ke place, however, a financial columnist wrote a damaging article cit ing Cook's background in the oil industry and questioning the company 's know-how in the video field. The article caused the equity offerin g to be canceled, and without this infusion of cash, Blockbuster bega n to run out of money.
In February , however, Cook sold one-third of Blockbuster to a gr oup of three investors, who were all former associates at another com pany, Waste Management, Inc. Wayne Huizenga had in cofounded Was te Management, which grew to be the largest garbage disposal business in the world, and served as its president and chief operating office r until , when he retired.
John Melk, the president of Waste Mana gement's international division, was first to invest in a Blockbuster franchise. With this move, Cook surrendered future control of Blockbuster, and H uizenga became the dominant voice in determining the company's future.
Where Cook had envisioned growth through franchising, selling Block buster's name and computer system to individual entrepreneurs, Huizen ga foresaw growth through company ownership of stores. In April , two months after the men from Waste Management bought into Blockbust er, Cook left the company.
Soon thereafter, the company's headquarter s were moved to Fort Lauderdale, Florida. By June , Blockbuster owned 15 stores and franchised 20 others. W ith this base, Huizenga set out to transform Blockbuster into the ind ustry's dominant player. He kept most of Cook's policies, such as sto re hours from a.
Despite conventional wisdom that the videotape rental business was heavily dependent on hits, 70 percent of Blockbuster's rental revenues came from non-hit movies, which had the added benefit of being less expensive to purchase from distributo rs. In addition, Blockbuster's management decided to eschew revenue f rom X-rated adult films, opting instead for a family environment.
With these policies in place, Blockbuster set out on a program of agg ressive expansion. The company began to buy back franchised operation s with the goal of 60 percent company-owned Blockbuster outlets. In a ddition, Wayne Huizenga began to buy up chains of video stores that a lready dominated their local markets, using this as a shortcut to qui ck expansion.
Two months later, it purchased Movies T o Go, Inc. To support its expansion, Blockbuster established six regional office s, including a distribution center in Dallas that prepared tapes to b e placed in stores. By the end of , Blockbuster was operating stores and had become the country's fifth largest video chain in ter ms of revenue. Blockbuster continued its ambitious expansion program in In Mar ch, the company purchased Video Library, Inc.
By November, this stake had risen to 20 percent. With stores, Blockbuster had beco me the largest video rental chain in the country. At the end of the y ear, the company's number of stores had risen to It also purchased Oklahoma Entertainment, Inc.
The following month brought the purchase of Vector Video, Inc. By June , two years after Huizenga's takeover, the company ran stores. Sales had tripled, profits near ly quadrupled, and the value of the company's stock had risen seven-f old. Despite these gains, in April , Blockbuster's efforts to buy up o ther chains with stock suffered a setback when an analyst at a large stock brokerage issued a report condemning what he considered to be t he company's misleading accounting practices.
In calculating its earn ings, Blockbuster spread out the costs of purchasing video store chai ns and building new stores over a year period, and also spread out the cost of buying large numbers of hit tapes over three years, much longer than tapes retained their value.
In addition, the company rel ied on one-time-only franchise fees for 28 percent of its revenue. De spite this criticism, Blockbuster declined to change its accounting p ractices, and the company's stock price eventually regained its forme r level.
In November , Blockbuster's largest shareholder, the United Artis ts Entertainment Company, announced that it would sell its 12 percent holding in the company, having previously sold its 28 franchised Blo ckbuster stores, in an effort to streamline its own business holdings. Worries that the video rental industry was reaching a saturation po int cast doubts on Blockbuster's ability to keep opening stores indef initely.
One response to this concern was to look to markets outside the Unite d States for growth. Accordingly, original investor John Melk was dis patched to start up a British subsidiary, with the company's first fo reign store to be opened in South London called the Ritz.
Blockbuster 's management continued to maintain that since the video "superstore" concept was open for anyone to copy, it needed to grab market share as fast as possible in order to exploit its ground-breaking concept. Carrying out this philosophy, the company opened its 1,th store be fore the end of In addition, the company acceler ated foreign expansion, augmenting its operations in Britain and plan ning for operations in Australia and the rest of Western Europe.
In t he United States, the chain had opened its 1,th store by June ; new outlets opened at a rate of one a day. In October , Blockbuster announced plans to cooperate with Den Fu jita, the company that ran McDonald's franchises in Japan, in the dev elopment and franchising of video rental stores in that country. Although Blockbuster continued its strong pace of new store openings in , the slowing growth of the video rental industry was becoming evident.
Even though the company's earnings grew an astronomical percent in , they contracted to a still-impressive 93 percent ra te of growth in , followed by a rate of 48 percent in In ke eping with this trend, first quarter financial results for were disappointing. Coronavirus Minneapolis St. Paul Duluth St. California, Colorado, N.
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