November 28, 2024 • 26 mins
One solitary Blockbuster Video location remains ...
The story of this lonesome Blockbuster provides a lens into the larger rise and fall of an American icon.
Noodles and I visit Bend, Oregon to unpack the truly fascinating story of The Worlds Last Blockbuster.
Works Cited:
https://www.jstor.org/stable/41948252?searchText=blockbuster+video&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3Dblockbuster%2Bvideo%26utm_source%3Dgoogle%26so%3Drel&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3A2e2181c12e0dcbf0453e4916fb6bb497
https://www.jstor.org/stable/24411692?searchText=blockbuster%20video&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3Dblockbuster%2Bvideo%26utm_source%3Dgoogle%26so%3Drel&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3A0ee9160783ad78079a9ef9af1e980484
https://www.thestreet.com/technology/history-of-netflix-15091518
https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/
https://www.imdb.com/title/tt8704802/
https://www.businessinsider.com/rise-and-fall-of-blockbuster
https://thebolditalic.com/so-i-visited-the-last-blockbuster-on-the-planet-and-all-i-got-was-this-t-shirt-ffc6d2ed414d
https://inspireip.com/blockbuster-failure-story/#:~:text=However%2C%20Blockbuster%20ignored%20customers'%20preferences,and%20ease%20in%20watching%20videos.
https://hbr.org/2011/04/how-i-did-it-blockbusters-former-ceo-on-sparring-with-an-activist-shareholder
https://www.the-independent.com/news/world/americas/the-last-blockbuster-netflix-oregon-b1817869.html
Noah and Noodles here!
We want to extend a heartfelt thanks to every listener of Backroad Odyssey.
Your support fuels our passion and inspires us to keep sharing stories and discover overlooked locations.
Follow each adventure visually at:
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Cruising down the street.
I wonder where this road wouldlead so many possibilities.
Care to share what you think.
Oh, noodle Dolls, what do yousee?
Back Road Odyssey?
(00:21):
Hues of vivid, blue and yellowsurround you, the plastic
perfume of countless VHSs andDVDs in the air.
Action, comedy, drama these arethe many genres littered
(00:44):
throughout the maze of aisles inthe store Twizzlers Oregon.
(01:08):
We're heading back into town tomake our grand pilgrimage to
the last operating blockbusterin the world.
Our grand pilgrimage to thelast operating blockbuster in
the world.
(01:28):
Blockbuster, a one-time culturalstaple, from Bend, oregon, to
Fort Myers, florida, sydney,australia, england and beyond,
now simply exists as a memoryfor so many people.
And this would continue to bethe case if not for where we're
going right now.
The story of this last solitaryblockbuster in Bend is just as
interesting as the broader storyof this Titanic company's
(01:53):
really slow decline.
We'll explore both storiestoday, but for now you know the
drill.
Let's start simple.
What made BlockbusterBlockbuster?
Let's start simple.
What made BlockbusterBlockbuster?
How did the signatureBlockbuster plastic card earn a
spot in the wallets, in thepurses, in the pockets of
(02:15):
millions?
Where else to start?
But the beginning.
The year is 1977.
Hell yeah, oh yeah.
With the seeds of Americanconsumerism of the 80s largely
already planted, the time is nowripe for new ideas and new
(02:39):
technologies to enter the market.
One such technology is the VHSto enter the market.
One such technology is the VHSvideo home system now available
across the states.
From here on, movies can besold directly to consumers, who
can watch them in the comfort oftheir own home.
That is for a price.
(03:00):
Your typical new VHS release inthe early 80s cost around $100.
Not entirely practical or ideal.
I've got to return somevideotapes Patrick Bateman,
american Psycho.
Enter the video rental storebusiness model which solves the
(03:28):
problem of price Walk in, pick amovie, spend a few dollars,
take it home, watch it, returnit and you are done Easy.
One such video rental store wasopened by David Cook in the fall
of 1985.
The store's name BlockbusterVideo in the fall of 1985.
The store's name BlockbusterVideo.
Cook's family-friendly videorental establishment, to put it
(03:49):
lightly, blows up Just threeyears later.
New stores open and profitssoar, and Blockbuster transcends
a term describing a film'ssuccess.
It becomes a destination at itspeak.
Blockbuster boasts 9,094 storesworldwide with an annual
(04:11):
revenue of over $5 billion.
How People forget there wereother rental stores.
Blockbuster did not invent it.
What's the key to Blockbuster'sunique success?
If you want to view paradise,simply look around and view it.
(04:31):
Willy Wonka and the ChocolateFactory, 1971.
Let's start with this.
Okay, so, where most videorental stores had limited copies
, especially of new releases,blockbuster has everything all
the time.
And not only that, they stayedopen longer.
(04:54):
You had three-day rentalperiods rather than just a
single day.
Stores were family-friendly.
There was no weird beaded doorin the corner of the room.
But, importantly, blockbusteralso claimed a unique revenue
share model with movie studios.
Rather than having to pay fullprice for each really expensive
(05:17):
VHS, later DVDs, blockbusterwould dish out 40% of each
rental to the studios.
Let's say this so Blockbusterrents out 100 copies of Dead
Poets Society in 1989 at $2 each.
Blockbuster keeps $120.
(05:37):
The studios keep $80.
And this revenue share modelmeans a uniquely cheaper supply
of videos, which enables morecopies of your newest releases
and, finally, enables increasedprofits to Blockbuster stores.
(06:03):
Perhaps the greatest key toBlockbuster's early success is
this Streamlined andconfidential technology.
That is right.
When we picture Blockbustertoday, we think archaic,
unadaptable, static.
But from the start, blockbusterused and embraced new
technology.
From the start, blockbusterused and embraced new technology
(06:24):
.
They had a unique computersoftware system that made
renting videos from anyBlockbuster around the world
faster.
Checkouts were faster,information was more easily
stored, age restrictionsautomated.
It was simpler, it was moreconvenient than any mom and
pop-pop video rental store inthe world.
(06:45):
And going off this, I'm goingto make a controversial
statement.
You might want to sit down.
Blockbuster Video was once thepinnacle of efficiency.
We're parked outside theBlockbuster right now.
It's pretty surreal.
(07:08):
It's like going back in a timemachine to sit here and to look
at those bold, brick-likeletters.
I remember so vividly the thrillof being able to physically
touch, physically search throughall of these different movies,
tv shows as a child.
For me it was always kind ofthis bright spot in the series
(07:30):
of family errands that we had torun.
Right, we'd go to the grocerystore, we'd go to Walmart,
walgreens, and if we made a stopat Blockbuster it was all right
with me because it was fun, itwas an experience.
And right here, right now, Ifeel like I'm in the back seat
again with my siblings waitingto go in and rent.
(07:52):
I don't know the Lion KingNoodles.
My dog wasn't even a glint inher grandparents' eye when this
happened.
But here's my question now Fromdinosaurs to to Zumba pants, to
Vine, to Seinfeld, all thesethings, all things end.
So how did Blockbuster right,with all its wealth, with all
(08:17):
its influence, all its power,how did it meet its demise?
Its demise?
Family, religion, friendshipthese are the three demons you
must slay if you wish to succeedin business, mr Burns.
Season 8, episode 21 of theSimpsons, cook leaves the
(08:39):
company in 1987 overdisagreements with former waste
management business mogul turnedBlockbuster CEO, h Wayne
Huizenga.
What are these disagreements?
Most simply put, cook wantsless debt, which slows company
growth.
Huizenga wants to take on moredebt, which stimulates growth.
(09:03):
Under Huizenga, blockbuster'sNapoleonic conquest of the video
rental space truly begins.
Blockbuster stops at nothinguntil you, your cousin and your
mother's uncle lives within theproximity of a Blockbuster store
.
Need a new location?
No problem, take on more debtwith the banks, as long as
(09:24):
you're physically growing.
It looks good on paper.
According to Zynga, in timeit's estimated a new Blockbuster
location opens every 17 hours.
And here, right here, is wherethe seed of our friendly little
Blockbuster that could in Bend,oregon, which still operates
(09:45):
today, is planted to grow at therate desired by Blockbuster
Video.
Blockbuster will franchise?
Pretty simple really.
Franchisee finds a piece ofland he likes, gets a lease
usually 20 years takes out aconstruction loan, throws up a
building and off he goes.
(10:06):
Ray Kroc, the founder 2016.
It's worth exploring just whatfranchising is for a minute.
A franchisee is a person orbusiness that pays a fee to a
franchisor Blockbuster in thiscase.
This payment allows thefranchisee to operate a business
(10:27):
under the franchisor's brandand systems.
Now for Blockbuster, this meansthe right to use their coveted
standardized computer systems.
Franchisees would also have theright to use products, brands,
materials and trademarks for aset number of years.
Agreements between franchisorsand franchisees can be different
(10:50):
from company to company.
For Blockbuster in 1988, whenBlockbusters were popping up
like weeds, you paid an initialfee of $55,000 to operate under
the Blockbuster name, then aquick $30,000 for proprietary
software, a fee for maintenanceand continued royalties and a
(11:14):
bit more here and there.
It was a lot by franchisingstandards, but it seems to have
been worth it in those earlyyears.
Monthly revenue by 1989 was, onaverage, $65,491 per month per
store.
Let's not get bogged down byall of the numbers.
(11:34):
All of this is to say there wasa reason to start a store or
convert a store under theBlockbuster name, expensive as
it was, as we will soon see withthe story of the last remaining
Blockbuster.
To continue, we need tounderstand the following fact
(11:58):
there is a small but criticaldifference, especially with
Blockbuster Video, betweencompany-owned stores and stores
owned and operated by afranchisee For Blockbuster.
On average, early on, abouthalf stores were company-owned,
(12:19):
meaning the company wasfinancially responsible for that
store, and about half werefranchised.
Its fate tied roughly to thefranchisees.
I'll just chime in quick forthose interested To operate at a
one to one ratio half companyowned, half franchised is a wild
(12:39):
thing.
Remember to open up all ofthese company stores.
Half franchised is a wild thing.
Remember to open up all ofthese company stores.
The accumulation of debt wasall but necessary.
You sleep yet, trust me, Imajored in cinema, arts and
science.
(13:04):
At no point in your rambling andcoherent response were you even
close to anything that could beconsidered a rational thought.
Everyone in this room is nowdumber for having listened to it
.
I award you no points and mayGod have mercy on your soul, the
Principal, billy Madison.
And may God have mercy on yoursoul, the Principal, billy
(13:25):
Madison.
We've never been better.
Over 9,000 stores 5.9 billionin revenue, 80,000 employees and
counting.
Investors of Blockbuster Videomust have boasted this statement
aloud during the summer of 2004.
Surely, as they were sayingthis, they would not have also
(13:46):
mentioned that currently thecompany is also $1 billion in
debt.
Four years prior, in 2000, asmall DVD mail-to-home startup
called Netflix approaches thetitanic business entity with an
offer For 50 million dollars buyus and we'll run your online
(14:09):
operations.
The founder of this company, ofNetflix, reed Hastings, is
laughed out of the room.
In retrospect, it's easy to seehow foolish this was, but why
say no Before you say anything?
It was not the debt.
They had in their possessionover $100 million in ready cash
(14:30):
to spend on whatever they wantedfrom a recent IP deal.
Let's go back in time.
The year is 2000.
Go back in time, the year is2000.
Netflix ships DVDs directly toyour house and charges no late
fees.
(14:50):
Why go to a physical locationwhen you can receive the movies
you want from home?
Simple, easy, convenientBlockbuster Video boasts
thousands of physical locations,but doesn't ship DVDs to your
house and charges late fees.
Which would you choose?
Like me, you must be wonderingwhy, blockbuster?
(15:16):
Must you continue down yourcrumbling road?
There are so?
So many reasons.
Let's start with this.
Blockbuster depends upon itslate fees.
16% of its profits come fromthem.
Also, large companies are oftenslow For Blockbuster, for
(15:37):
example, its shareholders andleaders are reluctant to pivot
in any way, especially to investin untested methods of making
money.
It had worked for so long forBlockbuster, why change?
One example of this is CarlIcken, an activist investor,
later Blockbuster CEO.
He was opposed to the idea ofturning the company online.
(16:00):
Ceo, he was opposed to the ideaof turning the company online.
He was adamant that thetime-tested business model of
brick-and-mortar stores would bemore successful.
In other words, he wanted tostick with a business model that
was turning out more and moreto not really be efficient, not
really work at, not for muchlonger.
(16:22):
Then, the nail in the coffin.
When Netflix launches itsstreaming service in 2007, with
superior software, flexibilityand limited debt, it was by then
much too late to pivot or tocatch up.
The elephant cannot catch thecheetah.
(16:45):
Change is inevitable, exceptfrom a vending machine.
Ferris Bueller's Day Off, 1986.
I'll ask again why didBlockbuster fail?
Here's the SparkNotes version.
They had an inability to pivotquickly Once it paved the way
(17:06):
for new technology and it wassmall enough to pivot when it
needed to After 2004,.
Even beforehand, if we're beinghonest, they were simply too
big, too outdated, riddled withdebt and too beholden to
shareholders to change.
They had an outdated businessmodel, it turns out.
(17:28):
Paying for brick and mortarbuildings customers no longer
were willing to travel to, andselling products that people
increasingly didn't need or wantfrom those buildings wasn't
exactly a recipe for successOutside competition in a
changing industry.
So actually buying DVDs becamemore popular as companies like
(17:51):
Walmart, best Buy, target andothers sold DVDs, really at a
loss to get people through thedoor.
They also, as we've kind oftalked about, undervalued
younger, quicker, morestreamlined upstarts like
Netflix and Redbox.
They had bad, or, let's say,delusional, leadership much of
(18:15):
the time.
Carl Ecken, especially hisinsistence of not doing much of
anything, wasn't great, andshareholders and a general
feeling of hubrisness filled therank and file.
We're big enough that we can'tfail.
Finally, what made BlockbusterBlockbuster in the first place?
(18:37):
It's debt.
When the 2008 financial crisishit, companies not built
exclusively on debt struggled,but tended to survive.
More often, blue and yellowstores down the street built on
really a house of cards, atreasure trove of debt,
(18:58):
essentially couldn't carry on.
I declare bankruptcy.
Michael Scott, the OfficeBlockbuster Video declares
bankruptcy in 2010.
Many hoped this would be a timeto reset and rethink what
(19:21):
Blockbuster is and could be, butit's fate, it seems, was
already written in stone.
One year later, dish Networksbuys the remaining company-owned
stores, along with NamingRights.
The final corporate-ownedBlockbuster store closes in 2014
.
The remaining franchise storesfight on bravely renewing naming
(19:46):
rights with the new owner, dishNetwork, until slowly, one by
one, they vanish, becomingmemory.
I'm in the blockbuster now.
I feel a bit strange recording.
(20:08):
There are people all around.
I'll make this brief.
Then we'll go out and we'lltalk all about it.
So just describe what I seequick the old technology, the
old computers, all of the aisleswith the different genres.
You know the snacks.
I've always thought it wasweird that they had a pickle on
(20:30):
the way out.
I don't know if anybody elsenoticed that.
It's so fun being here, butI've got a question.
Okay, blockbuster once had over9,000 locations, all relatively
standardized, all looking moreor less like where I'm at right
now, and many of them franchised, just like this store and in
similar towns.
How did this small blockbusterstore in Bend, oregon, survive
(20:54):
when so many did not?
What's different about thisstore.
I didn't hear no bell.
Rocky Balboa, rocky V the yearis 1991.
How did this one store survive?
(21:23):
Well, first off, you have tohave a community willing to come
by and rent movies, which Bendseems to have in droves.
You have to have devotedmanagement willing to put in the
work and make connections withpeople that come to your store,
which in a lot of ways isderived from the family business
aspect of what was once PacificVideo.
That ma and pop store mentalityseems to have survived
(21:45):
throughout the years.
And, in my view, maybe mostimportantly, as these
blockbusters start to close, youbecome a lot more relevant,
right when there's 20 left, whenthere's 10 left, when there
were just two left and then theybecame the last blockbuster.
There's a lot of power in beingthe last of anything.
(22:08):
Rarity in this case, becomesyour greatest asset.
Many of the store in Ben'scurrent revenue comes from
simply selling blockbustermerchandise inside the store,
not to mention another key totheir continued success is the
millions of dollars in freeadvertising.
(22:29):
Anyone that goes to the lastBlockbuster is not going to pass
up an opportunity to take apicture of the last Blockbuster,
as long as their licensingagreement with the current owner
of Blockbuster's name, dishNetworks, keeps being renewed.
The last Blockbuster willcontinue to survive.
(22:49):
What is dead may never dieTheon Greyjoy.
Game of Thrones, season 2,episode 3.
I'm back in my van, got a coolnew Blockbuster hat.
Noodles couldn't join, sadly.
I'm sure she would have lovedto, but that was cool.
It felt like a comforting hugfrom the 90s.
(23:11):
I didn't rent any movies Formany reasons.
I don't have a DVD player in myvan and I'm not from or around
Ben Oregon all that much.
From a lot of the research thatI've done, it seems like people
still come and rent videos,which is awesome, which is
awesome.
My guess is you'd have to be alocal.
But it's comforting in a weirdway to know that this archaic
(23:35):
practice is still aroundsomewhere, if not nearby me, and
I think that's what's sospecial about this location.
It's not just a museum, notsolely a nostalgic merchandise
store.
It's a living and it's abreathing blockbuster, something
that, when looking back at theroller coaster story from one
(23:59):
store to thousands and then oneagain, is, in my view, reason
enough to stop and to enter thelast blockbuster here in Bend
Oregon.
What, if anything, can we learnfrom the blockbuster story?
To never get too comfortable.
Change is important.
(24:19):
I don't know, sitting here in2024, 39 years after its
founding, 20 years since itspeak and 14 years after the
company declares bankruptcy, Idon't know if there is, or even
can be, an answer.
Blockbuster was and continuesto mean so many things to so
(24:42):
many people, either in memory orthanks to a small, family-owned
store in Bend, oregon.
In person.
It's Noah here.
Thank you genuinely forlistening to Backroad Odyssey.
My dog Noodles, and Iappreciate it.
(25:03):
So Bend, oregon, is one of myfavorite towns to visit, even if
it didn't have the lastblockbuster.
Would I recommend you going toBend just to go visit the last
blockbuster?
Probably not.
Probably not.
But I'll say this if you're inBend, if you're an outdoorsy
type or if you just enjoy thetown in itself, to be there and
(25:27):
to not go to the lastblockbuster is a missed
opportunity, because it reallyis now, with no blockbusters
left, a unique experience.
It feels surreal walkingthrough those aisles and there's
great merchandise.
I got a cool hat out of theexperience.
So, regardless, I hope youenjoyed this episode.
(25:50):
I hope you enjoy BackroadOdyssey If you appreciate all of
the work and research that goesinto each episode.
Taking a minute to write areview of the show really,
really helps us continue to putthe work that we'd like to into
each episode and do the researchthat we also.
Would like to Really appreciateyour continued support of the
(26:14):
show.
With that said, be good to eachother.
We're two next.
Cruising down the street.
I wonder where this road wouldlead so many possibilities.
Care to share what you think.
Oh, noodle Dolls, what do yousee?
Back Road Odyssey?
(00:21):
Hues of vivid, blue and yellowsurround you, the plastic
perfume of countless VHSs andDVDs in the air.
Action, comedy, drama these arethe many genres littered
(00:44):
throughout the maze of aisles inthe store Twizzlers Oregon.
(01:08):
We're heading back into town tomake our grand pilgrimage to
the last operating blockbusterin the world.
Our grand pilgrimage to thelast operating blockbuster in
the world.
(01:28):
Blockbuster, a one-time culturalstaple, from Bend, oregon, to
Fort Myers, florida, sydney,australia, england and beyond,
now simply exists as a memoryfor so many people.
And this would continue to bethe case if not for where we're
going right now.
The story of this last solitaryblockbuster in Bend is just as
interesting as the broader storyof this Titanic company's
(01:53):
really slow decline.
We'll explore both storiestoday, but for now you know the
drill.
Let's start simple.
What made BlockbusterBlockbuster?
Let's start simple.
What made BlockbusterBlockbuster?
How did the signatureBlockbuster plastic card earn a
spot in the wallets, in thepurses, in the pockets of
(02:15):
millions?
Where else to start?
But the beginning.
The year is 1977.
Hell yeah, oh yeah.
With the seeds of Americanconsumerism of the 80s largely
already planted, the time is nowripe for new ideas and new
(02:39):
technologies to enter the market.
One such technology is the VHSto enter the market.
One such technology is the VHSvideo home system now available
across the states.
From here on, movies can besold directly to consumers, who
can watch them in the comfort oftheir own home.
That is for a price.
(03:00):
Your typical new VHS release inthe early 80s cost around $100.
Not entirely practical or ideal.
I've got to return somevideotapes Patrick Bateman,
american Psycho.
Enter the video rental storebusiness model which solves the
(03:28):
problem of price Walk in, pick amovie, spend a few dollars,
take it home, watch it, returnit and you are done Easy.
One such video rental store wasopened by David Cook in the fall
of 1985.
The store's name BlockbusterVideo in the fall of 1985.
The store's name BlockbusterVideo.
Cook's family-friendly videorental establishment, to put it
(03:49):
lightly, blows up Just threeyears later.
New stores open and profitssoar, and Blockbuster transcends
a term describing a film'ssuccess.
It becomes a destination at itspeak.
Blockbuster boasts 9,094 storesworldwide with an annual
(04:11):
revenue of over $5 billion.
How People forget there wereother rental stores.
Blockbuster did not invent it.
What's the key to Blockbuster'sunique success?
If you want to view paradise,simply look around and view it.
(04:31):
Willy Wonka and the ChocolateFactory, 1971.
Let's start with this.
Okay, so, where most videorental stores had limited copies
, especially of new releases,blockbuster has everything all
the time.
And not only that, they stayedopen longer.
(04:54):
You had three-day rentalperiods rather than just a
single day.
Stores were family-friendly.
There was no weird beaded doorin the corner of the room.
But, importantly, blockbusteralso claimed a unique revenue
share model with movie studios.
Rather than having to pay fullprice for each really expensive
(05:17):
VHS, later DVDs, blockbusterwould dish out 40% of each
rental to the studios.
Let's say this so Blockbusterrents out 100 copies of Dead
Poets Society in 1989 at $2 each.
Blockbuster keeps $120.
(05:37):
The studios keep $80.
And this revenue share modelmeans a uniquely cheaper supply
of videos, which enables morecopies of your newest releases
and, finally, enables increasedprofits to Blockbuster stores.
(06:03):
Perhaps the greatest key toBlockbuster's early success is
this Streamlined andconfidential technology.
That is right.
When we picture Blockbustertoday, we think archaic,
unadaptable, static.
But from the start, blockbusterused and embraced new
technology.
From the start, blockbusterused and embraced new technology
(06:24):
.
They had a unique computersoftware system that made
renting videos from anyBlockbuster around the world
faster.
Checkouts were faster,information was more easily
stored, age restrictionsautomated.
It was simpler, it was moreconvenient than any mom and
pop-pop video rental store inthe world.
(06:45):
And going off this, I'm goingto make a controversial
statement.
You might want to sit down.
Blockbuster Video was once thepinnacle of efficiency.
We're parked outside theBlockbuster right now.
It's pretty surreal.
(07:08):
It's like going back in a timemachine to sit here and to look
at those bold, brick-likeletters.
I remember so vividly the thrillof being able to physically
touch, physically search throughall of these different movies,
tv shows as a child.
For me it was always kind ofthis bright spot in the series
(07:30):
of family errands that we had torun.
Right, we'd go to the grocerystore, we'd go to Walmart,
walgreens, and if we made a stopat Blockbuster it was all right
with me because it was fun, itwas an experience.
And right here, right now, Ifeel like I'm in the back seat
again with my siblings waitingto go in and rent.
(07:52):
I don't know the Lion KingNoodles.
My dog wasn't even a glint inher grandparents' eye when this
happened.
But here's my question now Fromdinosaurs to to Zumba pants, to
Vine, to Seinfeld, all thesethings, all things end.
So how did Blockbuster right,with all its wealth, with all
(08:17):
its influence, all its power,how did it meet its demise?
Its demise?
Family, religion, friendshipthese are the three demons you
must slay if you wish to succeedin business, mr Burns.
Season 8, episode 21 of theSimpsons, cook leaves the
(08:39):
company in 1987 overdisagreements with former waste
management business mogul turnedBlockbuster CEO, h Wayne
Huizenga.
What are these disagreements?
Most simply put, cook wantsless debt, which slows company
growth.
Huizenga wants to take on moredebt, which stimulates growth.
(09:03):
Under Huizenga, blockbuster'sNapoleonic conquest of the video
rental space truly begins.
Blockbuster stops at nothinguntil you, your cousin and your
mother's uncle lives within theproximity of a Blockbuster store
.
Need a new location?
No problem, take on more debtwith the banks, as long as
(09:24):
you're physically growing.
It looks good on paper.
According to Zynga, in timeit's estimated a new Blockbuster
location opens every 17 hours.
And here, right here, is wherethe seed of our friendly little
Blockbuster that could in Bend,oregon, which still operates
(09:45):
today, is planted to grow at therate desired by Blockbuster
Video.
Blockbuster will franchise?
Pretty simple really.
Franchisee finds a piece ofland he likes, gets a lease
usually 20 years takes out aconstruction loan, throws up a
building and off he goes.
(10:06):
Ray Kroc, the founder 2016.
It's worth exploring just whatfranchising is for a minute.
A franchisee is a person orbusiness that pays a fee to a
franchisor Blockbuster in thiscase.
This payment allows thefranchisee to operate a business
(10:27):
under the franchisor's brandand systems.
Now for Blockbuster, this meansthe right to use their coveted
standardized computer systems.
Franchisees would also have theright to use products, brands,
materials and trademarks for aset number of years.
Agreements between franchisorsand franchisees can be different
(10:50):
from company to company.
For Blockbuster in 1988, whenBlockbusters were popping up
like weeds, you paid an initialfee of $55,000 to operate under
the Blockbuster name, then aquick $30,000 for proprietary
software, a fee for maintenanceand continued royalties and a
(11:14):
bit more here and there.
It was a lot by franchisingstandards, but it seems to have
been worth it in those earlyyears.
Monthly revenue by 1989 was, onaverage, $65,491 per month per
store.
Let's not get bogged down byall of the numbers.
(11:34):
All of this is to say there wasa reason to start a store or
convert a store under theBlockbuster name, expensive as
it was, as we will soon see withthe story of the last remaining
Blockbuster.
To continue, we need tounderstand the following fact
(11:58):
there is a small but criticaldifference, especially with
Blockbuster Video, betweencompany-owned stores and stores
owned and operated by afranchisee For Blockbuster.
On average, early on, abouthalf stores were company-owned,
(12:19):
meaning the company wasfinancially responsible for that
store, and about half werefranchised.
Its fate tied roughly to thefranchisees.
I'll just chime in quick forthose interested To operate at a
one to one ratio half companyowned, half franchised is a wild
(12:39):
thing.
Remember to open up all ofthese company stores.
Half franchised is a wild thing.
Remember to open up all ofthese company stores.
The accumulation of debt wasall but necessary.
You sleep yet, trust me, Imajored in cinema, arts and
science.
(13:04):
At no point in your rambling andcoherent response were you even
close to anything that could beconsidered a rational thought.
Everyone in this room is nowdumber for having listened to it
.
I award you no points and mayGod have mercy on your soul, the
Principal, billy Madison.
And may God have mercy on yoursoul, the Principal, billy
(13:25):
Madison.
We've never been better.
Over 9,000 stores 5.9 billionin revenue, 80,000 employees and
counting.
Investors of Blockbuster Videomust have boasted this statement
aloud during the summer of 2004.
Surely, as they were sayingthis, they would not have also
(13:46):
mentioned that currently thecompany is also $1 billion in
debt.
Four years prior, in 2000, asmall DVD mail-to-home startup
called Netflix approaches thetitanic business entity with an
offer For 50 million dollars buyus and we'll run your online
(14:09):
operations.
The founder of this company, ofNetflix, reed Hastings, is
laughed out of the room.
In retrospect, it's easy to seehow foolish this was, but why
say no Before you say anything?
It was not the debt.
They had in their possessionover $100 million in ready cash
(14:30):
to spend on whatever they wantedfrom a recent IP deal.
Let's go back in time.
The year is 2000.
Go back in time, the year is2000.
Netflix ships DVDs directly toyour house and charges no late
fees.
(14:50):
Why go to a physical locationwhen you can receive the movies
you want from home?
Simple, easy, convenientBlockbuster Video boasts
thousands of physical locations,but doesn't ship DVDs to your
house and charges late fees.
Which would you choose?
Like me, you must be wonderingwhy, blockbuster?
(15:16):
Must you continue down yourcrumbling road?
There are so?
So many reasons.
Let's start with this.
Blockbuster depends upon itslate fees.
16% of its profits come fromthem.
Also, large companies are oftenslow For Blockbuster, for
(15:37):
example, its shareholders andleaders are reluctant to pivot
in any way, especially to investin untested methods of making
money.
It had worked for so long forBlockbuster, why change?
One example of this is CarlIcken, an activist investor,
later Blockbuster CEO.
He was opposed to the idea ofturning the company online.
(16:00):
Ceo, he was opposed to the ideaof turning the company online.
He was adamant that thetime-tested business model of
brick-and-mortar stores would bemore successful.
In other words, he wanted tostick with a business model that
was turning out more and moreto not really be efficient, not
really work at, not for muchlonger.
(16:22):
Then, the nail in the coffin.
When Netflix launches itsstreaming service in 2007, with
superior software, flexibilityand limited debt, it was by then
much too late to pivot or tocatch up.
The elephant cannot catch thecheetah.
(16:45):
Change is inevitable, exceptfrom a vending machine.
Ferris Bueller's Day Off, 1986.
I'll ask again why didBlockbuster fail?
Here's the SparkNotes version.
They had an inability to pivotquickly Once it paved the way
(17:06):
for new technology and it wassmall enough to pivot when it
needed to After 2004,.
Even beforehand, if we're beinghonest, they were simply too
big, too outdated, riddled withdebt and too beholden to
shareholders to change.
They had an outdated businessmodel, it turns out.
(17:28):
Paying for brick and mortarbuildings customers no longer
were willing to travel to, andselling products that people
increasingly didn't need or wantfrom those buildings wasn't
exactly a recipe for successOutside competition in a
changing industry.
So actually buying DVDs becamemore popular as companies like
(17:51):
Walmart, best Buy, target andothers sold DVDs, really at a
loss to get people through thedoor.
They also, as we've kind oftalked about, undervalued
younger, quicker, morestreamlined upstarts like
Netflix and Redbox.
They had bad, or, let's say,delusional, leadership much of
(18:15):
the time.
Carl Ecken, especially hisinsistence of not doing much of
anything, wasn't great, andshareholders and a general
feeling of hubrisness filled therank and file.
We're big enough that we can'tfail.
Finally, what made BlockbusterBlockbuster in the first place?
(18:37):
It's debt.
When the 2008 financial crisishit, companies not built
exclusively on debt struggled,but tended to survive.
More often, blue and yellowstores down the street built on
really a house of cards, atreasure trove of debt,
(18:58):
essentially couldn't carry on.
I declare bankruptcy.
Michael Scott, the OfficeBlockbuster Video declares
bankruptcy in 2010.
Many hoped this would be a timeto reset and rethink what
(19:21):
Blockbuster is and could be, butit's fate, it seems, was
already written in stone.
One year later, dish Networksbuys the remaining company-owned
stores, along with NamingRights.
The final corporate-ownedBlockbuster store closes in 2014
.
The remaining franchise storesfight on bravely renewing naming
(19:46):
rights with the new owner, dishNetwork, until slowly, one by
one, they vanish, becomingmemory.
I'm in the blockbuster now.
I feel a bit strange recording.
(20:08):
There are people all around.
I'll make this brief.
Then we'll go out and we'lltalk all about it.
So just describe what I seequick the old technology, the
old computers, all of the aisleswith the different genres.
You know the snacks.
I've always thought it wasweird that they had a pickle on
(20:30):
the way out.
I don't know if anybody elsenoticed that.
It's so fun being here, butI've got a question.
Okay, blockbuster once had over9,000 locations, all relatively
standardized, all looking moreor less like where I'm at right
now, and many of them franchised, just like this store and in
similar towns.
How did this small blockbusterstore in Bend, oregon, survive
(20:54):
when so many did not?
What's different about thisstore.
I didn't hear no bell.
Rocky Balboa, rocky V the yearis 1991.
How did this one store survive?
(21:23):
Well, first off, you have tohave a community willing to come
by and rent movies, which Bendseems to have in droves.
You have to have devotedmanagement willing to put in the
work and make connections withpeople that come to your store,
which in a lot of ways isderived from the family business
aspect of what was once PacificVideo.
That ma and pop store mentalityseems to have survived
(21:45):
throughout the years.
And, in my view, maybe mostimportantly, as these
blockbusters start to close, youbecome a lot more relevant,
right when there's 20 left, whenthere's 10 left, when there
were just two left and then theybecame the last blockbuster.
There's a lot of power in beingthe last of anything.
(22:08):
Rarity in this case, becomesyour greatest asset.
Many of the store in Ben'scurrent revenue comes from
simply selling blockbustermerchandise inside the store,
not to mention another key totheir continued success is the
millions of dollars in freeadvertising.
(22:29):
Anyone that goes to the lastBlockbuster is not going to pass
up an opportunity to take apicture of the last Blockbuster,
as long as their licensingagreement with the current owner
of Blockbuster's name, dishNetworks, keeps being renewed.
The last Blockbuster willcontinue to survive.
(22:49):
What is dead may never dieTheon Greyjoy.
Game of Thrones, season 2,episode 3.
I'm back in my van, got a coolnew Blockbuster hat.
Noodles couldn't join, sadly.
I'm sure she would have lovedto, but that was cool.
It felt like a comforting hugfrom the 90s.
(23:11):
I didn't rent any movies Formany reasons.
I don't have a DVD player in myvan and I'm not from or around
Ben Oregon all that much.
From a lot of the research thatI've done, it seems like people
still come and rent videos,which is awesome, which is
awesome.
My guess is you'd have to be alocal.
But it's comforting in a weirdway to know that this archaic
(23:35):
practice is still aroundsomewhere, if not nearby me, and
I think that's what's sospecial about this location.
It's not just a museum, notsolely a nostalgic merchandise
store.
It's a living and it's abreathing blockbuster, something
that, when looking back at theroller coaster story from one
(23:59):
store to thousands and then oneagain, is, in my view, reason
enough to stop and to enter thelast blockbuster here in Bend
Oregon.
What, if anything, can we learnfrom the blockbuster story?
To never get too comfortable.
Change is important.
(24:19):
I don't know, sitting here in2024, 39 years after its
founding, 20 years since itspeak and 14 years after the
company declares bankruptcy, Idon't know if there is, or even
can be, an answer.
Blockbuster was and continuesto mean so many things to so
(24:42):
many people, either in memory orthanks to a small, family-owned
store in Bend, oregon.
In person.
It's Noah here.
Thank you genuinely forlistening to Backroad Odyssey.
My dog Noodles, and Iappreciate it.
(25:03):
So Bend, oregon, is one of myfavorite towns to visit, even if
it didn't have the lastblockbuster.
Would I recommend you going toBend just to go visit the last
blockbuster?
Probably not.
Probably not.
But I'll say this if you're inBend, if you're an outdoorsy
type or if you just enjoy thetown in itself, to be there and
(25:27):
to not go to the lastblockbuster is a missed
opportunity, because it reallyis now, with no blockbusters
left, a unique experience.
It feels surreal walkingthrough those aisles and there's
great merchandise.
I got a cool hat out of theexperience.
So, regardless, I hope youenjoyed this episode.
(25:50):
I hope you enjoy BackroadOdyssey If you appreciate all of
the work and research that goesinto each episode.
Taking a minute to write areview of the show really,
really helps us continue to putthe work that we'd like to into
each episode and do the researchthat we also.
Would like to Really appreciateyour continued support of the
(26:14):
show.
With that said, be good to eachother.
We're two next.
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