#TechDummies ISTM 654.32

Movie Rental BusinessBlockbuster, Netflix, Redbox

1 I

2006200320001994199119881985 1997

Ayelet Awad | Frank Fisher | Paul Gonzalez Blake Kuchar | Wes Sullivan

BY: #techdummies

2010

2014

#TechDummies ISTM 654.322 I

RoleMovie Rental Business

CEOJim Keyes

#TechDummies ISTM 654.323 I

Case SummaryMovie Rental Business

Blockbuster’s B&M = Unsustainable operating costs

Netflix (Subscription) & Redbox (Kiosks) = lean operating costs

Blockbuster remained unresponsive until it was too late

#TechDummies ISTM 654.324 I

Critical IssueMovie Rental Business

How does Blockbuster survive?

#TechDummies ISTM 654.325 I

MetricsMovie Rental Business

1. Financial Health 1. Level of Investment 1. Adaptability a. Debt/Asset Ratio a. Implementation Cost a. People Low: < 40% Low: < 50MM Low: < 5,000 High: >= 40% High: >= 50MM High: >= 5,000 b. Operating Profit Margin b. Timeframe b.Technology investment Low: < 15% Low: < 1 Year Low: < 3MM High: >= 15% High: >= 1 Year High: >=3MM

#TechDummies ISTM 654.326 I

WeightsMovie Rental Business

Adaptability25%

Financial Health 35%

Level of Investment40%

#TechDummies ISTM 654.327 I

ScorecardMovie Rental Business

Metrics

Description Financial Health Level of Investment Adaptability Total

Option 1 Option 2 Option 3 Option 4

Weighted Scores

Description 35% 40% 25% 100%

Option 1

Option 2

Option 3

Option 4

#TechDummies ISTM 654.328 I

Potential SolutionsMovie Rental Business

#TechDummies ISTM 654.329 I

ScorecardMovie Rental Business

Metrics

Description Financial Health Level of Investment Adaptability Total

VOD (Partner with Cable Provider) 2 4 3 9.00Pizza & Movie Rental 3 1 2 6.00Electronic Sell Through Platform 4 2 3 9.00Blockbuster Electronics 1 1 2 4.00

Weighted Scores

Description 35% 40% 25% 100%

VOD (Partner with Cable Provider) 0.7 1.6 0.75 3.05Pizza & Movie Rental 1.05 0.4 0.5 1.95Electronic Sell Through Platform 1.4 0.8 0.75 2.95Blockbuster Electronics 0.35 0.4 0.5 1.25

Optimal Solution: Partner with Cable Provider to provide Blockbuster-branded VOD services.• Leverage Studio relationships to deliver new release & catalog content• B&M to pure digital distribution• Lean Operating Costs (liquidate all retail stores)

#TechDummies ISTM 654.3210 I

Implementation TimeframeMovie Rental Business

Liquidate all stores during Chapter 11• 6 Months• KPMG• 75MM+

Operationalize & Go Live!• 1 Month

System Integration• 1.5 Months• IBM• 2MM

Build Infrastructure• 3 Months• KPMG• 4.5MM

Reduction in Overhead Cost Highly Convenient Low Marketing Cost

Value?

#TechDummies ISTM 654.3211 I

Risk & MitigationMovie Rental Business

Weak to Small Content Library Strong Studio Partnerships

Dependence on Cable Provider Partner with multiple Cable Providers

User Adoption Intuitive Interface & Functionality

Long Term Studio Acceptance Appealing Revenue Model

#TechDummies ISTM 654.3212 I

ControlsMovie Rental Business

Project Implementation Team to manage timeline & budget

Any software or hardware cost variance over 5% must be approved by steering committe

Weekly project status meetings using a RAG process

Use project management software to track and report status, progress, issues.

Weekly project scorecards to monitor employee efficacy

Hire & train a technology team to operate an maintain the VOD structure

Team is responsible for maintaining 99.99% SLA uptime

Create runbook to resolve critical system issues

Reward cable partners for reaching monthly VOD sale targets

Use monitoring dashboard to proactively address system issues

Project Operational

• RED: requires a full assessment before project can continue

• Amber: requires proper communication to the board and careful progress monitoring

• Green: indicates no issues & project is on-time

• Weekly automatic outage reports that monitor uptime

• Real time alerts to notify engineers of system issues

#TechDummies ISTM 654.3213 I

Movie Rental BusinessBlockbuster, Netflix, Redbox

Questions?