Blockbuster BOARD OF EXECUTIVES

Blockbuster BOARD OF EXECUTIVES I

Position Paper Guidelines Position Paper Guidelines What s it all about? The purpose of a position paper is to display your understanding of the committee topics as well as your position s stances on different issues. Writing a position paper will assist you in your research and preparation for the conference. The position paper will be comprised of three to four sections, depending on the number of topics your committee covers. Section One: Background Information Introduce your country or position by providing basic information and background. This section should start out broad, followed by any general information that is relevant to the committee as a whole. This only needs to be done once not for every topic. Remaining Sections: Topics Write one section for each topic. The header of each section should be the topic name as it is titled in your Background Guide. These sections should be roughly half a page to one page (double spaced) in length and should include: 1. Background information on the topic 2. Your position/country s stance on the issue at hand 3. Statistics and other relevant information with respect to your position 4. Policies or actions your position/nation has supported 5. Proposed solutions to each of your topics 6. Responses to the Questions to Consider provided throughout the Background Guide

Position Paper Guidelines Formatting A position paper should be formatted like a formal essay: use 12 pt Times New Roman font, black ink, and 1 margins. All information that is not common knowledge should be cited using your most comfortable format (ex. MLA, APA, Chicago, etc.). The header of your paper should include the following pieces of information: 1. Your Full Name 2. Full School Name 3. Committee (World Health Organization, United Nations Development Program, etc.) 4. Country/Position

Letter from the Director Dear Sponsors and Delegates, Welcome to the 16th session of the William and Mary Middle School Model United Nations Conference, and more specifically to the Blockbuster Board of Executives. Let me start off by introducing myself. My name is Shreyas Bhalle and I am a freshman here at the college. I intend on majoring in Neuroscience with a minor in Public Health. While my career interest lies in the medicine, I have been doing Model UN since my freshman year in high school. Outside of Model UN, I am a huge fan of basketball and watch the NBA somewhat religiously. My affiliations are quite variable. I am a youth ambassador for the Akshaya Patra Foundation which helps eradicate hunger and malnutrition in India. In addition, I am a research lab tech for the United States Veteran Affairs Department at McGuire Research Institute in the Hunter Holmes McGuire VA Medical Center. I am ecstatic to meet all of you and see what solutions you have to bring to the myriad of problems that had plagued the Blockbuster Board of Executives in the 2000s. As the Director of this committee, I am looking for active participation, effective and concise speaking, strong leadership skills, and an overarching understanding of the topics. Above all else, I am looking for diplomacy and high quality solutions to the topics at hand that align with your role on the executive board. Please let me know if you have any questions and I will be happy to answer them. I am looking forward to meet all of you in a few months. Good luck delegates! Godspeed, Shreyas Bhalle Director - Blockbuster Board of Executives ssbhalle@email.wm.edu

Letter from the Director Dear Sponsors and Delegates, Welcome to the sixteenth session of the William & Mary Middle School Model United Nations Conference, and to the Blockbuster Board of Executives. The entire WMIDMUN staff, including myself, are delighted to have you on campus this weekend. Now, please allow me to introduce myself. I am currently a freshman at the College, hailing all the way from sunny Miami, Florida. I am planning to double major in International Relations and Economics, along with a Certificate Program in Public History, Museum Studies, and Material Culture. I have been involved in Model United Nations since I was in sixth grade, and have traveled to over 15 conferences in my Model UN career. I have also served as a Crisis Director for BelenMUN (my high school s conference) and as a Committee Chair for WMHSMUN (W&M s high school conference). Needless to say, Model UN has been an integral part of my life, and I hope that this weekend will give you a glimpse of that. Besides the International Relations club, I am involved in a social fraternity, Sigma Alpha Epsilon, as the Brotherhood Chair, and enjoy salsa dancing and working as an archivist in Swem Library Special Collections. This weekend, you will be faced with all sorts of unique and entertaining crises. As Blockbuster executives, you will need to eliminate an ever-increasing debt, take back control of the movie rental industry, and modernize the company. I am excited to see what creative solutions are brought to the table over the next three days to save the greatest movie rental platform ever created sorry Netflix from bankruptcy. Should you have any questions about William & Mary, WMIDMUN, or the committee, please feel free to email me at ojberlanga@email.wm.edu. Good luck in your preparation and see you soon! Sincerely, Oscar J. Berlanga Crisis Director - Blockbuster Board of Executives ojberlanga@email.wm.edu

Blockbuster Board of Executives Background Blockbuster LLC was founded by David Cook in 1985 after his business, Data Cook Services turned out unsuccessful which supplied software services to oil and gas industries across Texas. Blockbuster opened its first store in Dallas Texas in 85. Cooks previous experience in management allowed for Blockbuster to become a very successful business even being the largest video rental chain in the world in-home rental, retail movie, and game entertainment. In its peak, the company served roughly 3,000,000 customers daily in the United States and its territories as well as the 24 other nations it caters to. The company which started off as an alternative to retail stores with limited selection and local placement, had blossomed into a large global chain which served customers quite effectively through video game and video rental programs along with an online subscription. A small dent in the road came up in the fall of 1986. By then, the company had expanded to three stores and had officially changed its name to Blockbuster Entertainment Corporation from Cook Data Services. While attempting to raise money for more expansion as well as stock offering, a columnist had written an article regarding Cook s background in data services which questioned his overall expertise in the video field which cancelled the offering of equity. Blockbuster as a result started running out of money and more specifically, in 1986, ended up with a net loss of 3.2 million USD. In order to achieve his dreams of expansion and success, the following February, Cook gave 33.3% equity in the company to a group of investors all from the company, Waste Management Inc., which is now the world s largest garbage disposal business. The group invested a total of 18.6 million USD in stock. Waste Management co-founder, Wayne Huizenga and his associate John Melk used their own strategies for expansion and business rapidly expand Blockbuster in which they were able to achieve a new store opening every 24 hours. In the early 1990s, Blockbuster acquired Erol s, their rival company with over 250 stores as well as the Sound Warehouse and Music Plus retail chains in which Blockbuster Music was created. Being a multi-billion dollar company, they proposed a merger with Viacom and as the stocks of both companies fell rapidly in 1994, Blockbuster was

Blockbuster Board of Executives purchased by Viacom for 8.4 billion USD. In 2000, Blockbuster turned down a chance to purchase the up and coming Netflix for 50 million dollars, which remains as the worst business decision in Blockbuster history. In 2004, Blockbuster separated from Viacom. During its peak in 2004, the company had over 9 thousand stores in the United States. By 2010, Blockbuster had only 6500 stores of which only 4000 were based in the US in part because of the intention of a hostile takeover of Hollywood Video as well as the proxy fight to add members to the Board of executives and the accusations of overpaying the chairman and the CEO. In July of 2010, the company was delisted from NYSE. The company was also unable to make a 42 million dollar payment to bondholders and was given until the 13th of August, and then the 30th of September in 2010. On September 23rd of 2010, Blockbuster filed for Chapter 11 Bankruptcy. -- VERY IMPORTANT --- This committee will take place in 2004, during the peak of Blockbuster s operation. Topic One: Internet Streaming The topic of internet streaming revolves largely around the impending threat that the internet poses to Blockbuster. In 2004, during the meeting of the board of executives, Blockbuster has already turned down the buying of Netflix and since it is sticking to its conventional formats, there is a threat to the efficiency of store rental since internet streaming allows for faster accessibility and a wider range of options, all services that Netflix can provide. The current situation is that Netflix has gained some momentum due to the ideas stated before. The main problem that stems from this are the people that use both Netflix and Blockbuster. The demographics and general statistics of both differ quite widely. It was known that 70 percent of all of Blockbuster users lived less than 10 minutes away. Netflix on the other hand has an online DVD rental program where the customer can live anywhere with Netflix services and not have the leave the house, making Blockbuster relatively obsolete. The main ideas that should be targeted are how Blockbuster can change its strategy from supporting local customers to more global customers via internet streaming or if chosen to go against the idea of internet streaming, fortify the side of selling to customers in store while targeting the right population. Another main idea that should be targeted

Blockbuster Board of Executives are how Blockbuster s services can be expanded to reach the target population that find Netflix more convenient. Most blockbuster users are those with families in their 30 s and 40 s while Netflix has users of all age groups but mostly younger people and youths, but they are rising in users due to their economic feasibility. This can also be addressed in Topic 2. Questions to consider: 1. What is the best way to tailor the current method of selling to customers to tackle the impending threat that Netflix and internet streaming provides? 2. What is the best course of action to deal with the inefficiency in having to go to a physical location to rent videos rather than streaming them online? 3. How can the video rental process be optimized to adapt to the changing times? Topic 2: Demographics and Regulations Addressed minimally in the previous topic was that of the demographics issue. Many of the consumers that are customers at Blockbusters are relatively older since it takes time out of the day to go to the location and rent the video while consumers for Netflix and other internet services are quite younger since there is less time in their day to go to the store. Because of this situation, there is a major problem in the way the DVDs and videos are being sold as it only covers a very small number of the total possible population. An important idea that should be addressed is that because of the disparity between consumers, the result is that the overall profits for companies tailoring products to elder generations will have less profits than those tailoring products to younger consumers. This is also in part because of the income disparity as a result of the age gap in consumers. Since Blockbuster is already limiting in profit revenue and are dwindling in their overall balance, what steps can the board take to maximize the profits that are being made so that bankruptcy is not declared. A regulation that relates directly to demographics is that of late fees, a major-profit earner for the company. Should the company do away with late

Blockbuster Board of Executives fees and instead charge customers a monthly fee to keep a DVD if they want? What will this mean for the company as a whole and how this can affect the long road ahead for the company? While Netflix is having customers order and online and having it home delivered to their consumers, Blockbuster is sticking to its own ways. Is this a profitable situation or should there be change in the way this process is being carried out? Statistics and relevant information: By December 31st 2005: Total Domestic Store Totals: 5,696 Total Intl Store Totals: 3,346 Class A Stock Sales Prices by Quarter Quarter ending June 30th 2004 o High: $17.58 o Low: $14.61 Quarter ending December 31st 2004 o High: $10.49 that they can keep their products as long as they choose? o Low: $6.50 Quarter ending June 30th 2005 o High: $10.65 o Low: $8.76 Quarter ending December 31st 2005 o High: $5.74 o Low: $3.19 Net Loss in 2005: $588.1 million Questions to consider: 1. If the strategy of physical locations be changed, what will happen to the 4000+ locations Blockbuster uses since the liability would be overwhelmingly high? 2. How will the demographic issue be tackled given the disparity between age and profit earned? 3. Is it wiser to adapt a home-delivery system like rival companies or remain localized in the approach and continue selling products in stores? 4. Should the late fees be abolished in order to make room for monthly charges to customers so

References References: http://www.slate.com/articles/arts/the_hollywood_economist/2006/01/hollywoods_new_zom bie.html http://amitadeshpande.blogspot.com/2010/12/netflix-vs-blockbuster.html https://en.wikipedia.org/wiki/blockbuster_llc https://www.forbes.com/2010/05/18/blockbuster-netflix-coinstar-markets-bankruptcycoinstar_slide/#47932af59009 https://www.thestreet.com/story/10867574/1/the-rise-and-fall-of-blockbuster-the-longrewinding-road.html http://www.referenceforbusiness.com/history2/93/blockbuster-inc.html http://www.businessinsider.com/how-netflix-bankrupted-and-destroyed-blockbusterinfographic-2011-3 https://money.usnews.com/money/blogs/flowchart/2010/09/23/how-netflix-and-blockbusterkilled-blockbuster https://www.topaccountingdegrees.org/netflix-vs-blockbuster/ https://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-reallyfailed-and-why-it-didnt-have-to/#48d4d6d01d64