NEW YORK - Nothing at the Blockbuster (BBI) store in lower Manhattan on a recent drizzly Saturday night seemed out of the ordinary - not the crowd producing a low chatter in the fluorescent-lit aisles, the kids running around looking for PlayStation2 games, the long snake of people waiting to pay. But this routine scene was extraordinary in its own way, when you consider that Blockbuster was supposed to be extinct by now.
Predictions of the video-rental chain's death date back at least a decade. In 1991 a story in USA Today declared that the "the industry's demise [is] on fast-forward" because soon people would be dialing up movies with their phones. The paper went on to quote a money manager who dismissed Blockbuster as a "casket case" that wouldn't be around in three years. CEO John Antioco, who joined the company in 1997, got used to the strange drill of downplaying what everyone else was playing up. "Technology has been looming large since I got here," he sighs. "At that point, people had been talking about the demise of video for at least six or seven years."
It didn't help Blockbuster's image when, in March, its own foray into the future of home entertainment fell apart. It was in the middle of market trials with energy giant Enron (ENE) to provide video-on-demand, the generic name for a host of services widely predicted to signal the obsolescence of video stores. Like similar projects in the works, Blockbuster's would have let people order movies at home with the push of a button and view them with all the features of a VCR. But many of the big studios spurned Blockbuster's effort to hedge its bets and refused to license the digital rights to their films. The ultimate indignity was that not even Paramount, Blockbuster's corporate sibling (both are owned by Viacom (VIA)), wanted to strike a deal.
But premature death notices haven't killed Blockbuster. And its survival says a lot about how a much-heralded technology can get hung up on the way to your home entertainment center. Video-on-demand became technically possible before anyone figured out how to make money from it, and before the studios could resolve their own internal power struggles. Key agreements remain to be struck among movie makers, distributors and retailers; for Blockbuster, the challenge is to build alliances with partners that are resistant to granting it any more power than it already has. Complicating the dealmaking is the haziness over who will pipe video-on-demand into the nation's living rooms. Despite the abundant ink it has gotten in the business press, "no one really knows where it's going," one studio executive confesses.
Still, Blockbuster can't afford to assume that it can hold off the future forever. The chain says it will broker new deals and woo the studios - or play hardball, if it has to. "We look at technology and say, 'It's a business opportunity. It's not something to be scared of,'" says company spokeswoman Karen Raskopf. But the question remains: Will Blockbuster help forge the brave new world, or be devoured by it?
Not so long ago, Blockbuster itself was the newest thing in the movie business. Beginning with its first store in 1985, the company introduced a new polish and breadth to home-video retailing and rental, which had been dominated by local mom-and-pops, many of them cramped and poorly stocked. Blockbuster set its marketing sites on the family: It didn't carry X-rated movies and had plenty of room for kids to run up and down the clean, well-lit aisles. The company gained some sizzle in 1987 when Wayne Huizenga bought the chain. Huizenga was a flashy entrepreneur who made a fortune in trash-hauling and later owned the Florida Marlins (dossier) baseball team when it won the World Series.
