ANALYSIS: Client Profile - A smarter, more flexible Blockbusterreturns home

Blockbuster has put the bad times well behind it. Today, back in Dallas, focused on home entertainment, and open to new ideas, its perch atop the video rental world is secure.

Blockbuster has put the bad times well behind it. Today, back in Dallas, focused on home entertainment, and open to new ideas, its perch atop the video rental world is secure.

Homecomings highlight Blockbuster Entertainment's recent history.

In 1997, the company moved its corporate headquarters back to Dallas, the city of its birth. John Antioco took over the CEO's chair, returning to the city where he had been SVP of operations and marketing for 7-Eleven.

And this year, the company synonymous with video rental brought back its best-known tagline: "Make it a Blockbuster night."

Helping customers come home with just the right Friday-night flick is what Blockbuster is all about. Accordingly, PR strategy aims to reach movie buffs where they live.

Dallas businessman David Cook opened the first Blockbuster in 1985, and Fort Lauderdale, FL entrepreneur Wayne Huizenga took it over two years later. Through a series of acquisitions, it became the global leader in home movie rentals. Today, Blockbuster owns or franchises nearly 8,000 stores in 27 countries, and brand recognition approaches 100%, claims corporate communications SVP Karen Raskopf.

Entertainment mogul Sumner Redstone's Viacom bought Blockbuster in 1994, and relations with Huizenga soon soured. Huizenga's public insinuation of financial finagling gave Blockbuster's image a black eye, according to Redstone in A Passion to Win, the autobiography he co-authored last year with Peter Knobler. To this day, Blockbuster's PR people get skittish when Huizenga's name comes up. Dallas' central location and favorable business climate undoubtedly looked good to management, but the relocation also helped distance the company from Huizenga.

Returning to where it all began

Blockbuster came home to Dallas leaderless and without focus. Half its HQ employees decided not to move, leaving the company lacking management depth and institutional memory. Before former Taco Bell CEO and Circle K chairman Antioco took the helm, two short-term CEOs had meandered down tangential paths that muddled the core business. "At the time, it was a great question as to whether (Blockbuster) was a viable concept going forward,

recalls Andrew Stern, who's Dallas-based Sunwest Communications helped with the relocation.

Antioco brought marketing ideas and several staffers from 7-Eleven, including Raskopf and chief marketing officer Jim Notarnicola. At 7-Eleven, Raskopf had developed a national network of independent contractors to localize campaigns and work closely with store managers on special events.

Given its emphasis on localized marketing, the network system fit Blockbuster well, too. The PR team works with 25 contractors regularly, many of whom also serve 7-Eleven, and calls on another 10 when needed to reach the top 40 US markets.

Internationally, PR operatives report to geographically based marketing directors and make their own calls on hiring outside firms, Raskopf notes. Although Blockbuster is managed independently, parent company Viacom owns about 80% and handles any government affairs issues that crop up. PR heads at Viacom and its other companies - including Paramount, CBS, MTV, and Showtime - often bounce ideas off one another.

PR at Blockbuster is highly integrated into the marketing mix. Raskopf describes a baseball diamond with PR consultants on one base, marketing publicity manager Kevin Gardner at another, local operations people at a third, and Blockbuster's media buying/marketing planning contractor Camelot Communications (Dallas) rounding out the team.

PR often extends the reach of advertising, as evidenced by the new "Pet Shop

spots that premiered during the Super Bowl. James Woods and Jim Belushi voice Carl the rabbit and Ray the guinea pig, whose home in a pet store window overlooks a neighboring Blockbuster. Playing up the ads' big-name stars and Oscar-winning animators, Raskopf says Blockbuster got about $2 million worth of news coverage from an accompanying VNR.

It helps to be on top

Being the world's largest movie rental chain may beg David-and-Goliath comparisons, but it carries definite PR advantages as well. Blockbuster uses its own sales data, internet surveys, and commissioned research to issue fun-fact press releases each week. One recent example reveals that people eat more popcorn watching comedies and horror movies than tear jerkers or chick flicks. Such tidbits make for no-brainer DJ banter and entertainment-page filler. "I use those all the time,

admits Reggie McDaniel, who's movie review program is widely heard on Colorado radio.

Blockbuster's successful return to its home-entertainment roots doesn't make the company an innovation couch potato. Blockbuster is quick to try new ideas, and just as quick to take its lumps for those that don't work.

Its embrace of DVD is paying off grandly, for example, but when a short-lived RadioShack-within-Blockbuster trial didn't prove profitable, both companies cut their losses.

And then there's the Enron connection. Fortunately, Blockbuster got out early enough to appear wise in hindsight. More than a year ago, the company scrapped much-touted plans to use Enron's broadband network to deliver video-on-demand (VOD). "We'd lost confidence in them as a partner, and I think that speaks volumes considering everything we've seen since,

Raskopf says. And Blockbuster's media relations staff didn't hide from the bad news, says Scott Hettrick, editor-in-chief of Video Business magazine. "They remain accessible, even during tough times."

Despite Antioco's positive bottom-line results, some naysayers clung to doomsday prophesies about Blockbuster until fairly recently. "It wasn't necessarily that Blockbuster was not communicating well,

opines Barry Sosnick, a New York analyst with Fahnestock & Co. "It was that Wall Street wasn't listening."

Seizing opportunities

Those who believed in dot-com nirvana insisted VOD would put Blockbuster out of business. Why would anyone drive to a store when they could download movies at home? "I don't know a lot of people who want to gather around their PC on a Friday night to watch a movie,

Raskopf counters. Like so many other techno-dreams, a practical and profitable VOD model hasn't materialized. "I wish VOD would get here,

Raskopf laments. "Then people would say it's not a threat, it's an opportunity."

In fact, where others see adversaries, Blockbuster often sees partners.

Hoover's still puts wireless-cable company DirecTV on the competitors lists under Blockbuster's company profile, for example, even though the chain has become one of DirecTV's largest distributors since it started selling the service in its stores two years ago. "When we rolled it out, a lot of people were scratching their heads,

Raskopf admits. Instead of plopping down in front of their TVs with beer and pretzels, never again to rent movies, those who buy DirecTV systems at Blockbuster usually become faithful customers. The companies also partner on a pay-per-view alliance, positioning Blockbuster to jump on the VOD bandwagon if it ever gets rolling.

The DirecTV example supports the contention oft repeated by Blockbuster spokespeople that, like the universe, the "entertainment pie

expands infinitely. In other words, a new video-delivery mechanism doesn't trample the older ones. "The heaviest consumers of movies in the theater are the heaviest consumers of movies to rent,

Raskopf explains. "It's not us against them."

It also illustrates that, as many prodigal children, Blockbuster came home older, wiser, and with a broader view of the world.

BLOCKBUSTER

IN-HOUSE PR TEAM

SVP, corporate communications: Karen Raskopf (reports to EVP and chief marketing officer Jim Notarnicola)

VP, PR: Liz Greene

VP, IR: Mary Bell (reports to CFO)

Director, corporate communications: Randy Hargrove

Director, intercultural and community affairs: Larcine Bland

Director, strategic communications: Patricia Pape (includes internal communications and internet)

EXTERNAL PR

Network of more than 25 independent consultants. Contracts with Paine Communications (New York and Los Angeles) for creative projects; The Powell Group in Dallas for some national projects; and Bender/Helper Impact in LA, which supports DEJ Productions, a division that buys and markets independent films.

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