Week 2 Assignment HRM 587 Jennifer Pattison 09/30/2013

Between Blockbuster, Netflix and Redbox you would think there was enough competition but the only guarantee in business is that everything changes. There will always be another competitor trying to get a foot in the door or come out with something just a little more unique than the last. Unfortunately both Blockbuster and Netflix have not exactly succeeded in revamping themselves so that it makes it more difficult for their competition to accomplish this feat. Blockbuster was founded in 1985 and made public only a year later. (Marcus, 2011) In 2003 they faced their biggest loses to new competitors Netflix and Redbox (Marcus, 2011) and unfortunately refused to see the need for technological and business model changes; resulting in many negative impacts. In 1997 Netflix was founded and it took 5 years to go public, in 2002. (Fundinguniverse.com, u.d.) They were an answer to Blockbusters unspoken refusal to change their business model which was outdated and many customers were tired of. Redbox began their services in 2002 and was initiated by Gregg Kaplan, who has since resigned as CEO. Currently Redbox is going through a change in services they offer and have two CEOs. Anne Saunders is the head of the traditional Redbox services and recently, March 14, 2013, Redbox Instant officially went public with Shawn Strickland as its CEO. During the years to follow their founding all three companies faced many adversities and technology trend changes. The biggest difference between these companies is the effort each put into reinventing themselves. As technology becomes more and more relevant in the market place the more business owners must follow and track the trend changes. Unfortunately because technology is such a fast paced industry it then affects the pace at which regular organizations also must change.

In 1985 first Blockbuster opens in Dallas, Texas under the name Cooks Data Services, owned by David Cook. In June 1986 Blockbuster officially changes its name. In 1987 Cook sells a franchise to a group of investors and leaves the company to new CEO Wayne Huizenga, who was the co-founder. In 1989 they go public on the stock exchange but in 1991 profits are already suffering because of the increase in video industry competitors. Blockbuster responds by expanding their industry to offer music by acquiring Music Plus and Sound Warehouse for $185 million. Only one month later they partner with Virgin to open locations in the U.S., Europe and Australia; but this is later sold off in 1998, after Viacom acquires Blockbuster for $8.4 billion 1994. Huizenga also steps down as CEO in 1994 and is replaced by Steven Berrard; but only for a year and a half when Berrard was replaced by Bill Fields in 1996. Fields make changes like increasing merchandise products to sell throughout locations and transitions from Blockbuster Entertainment Corporation to Blockbuster, Inc. 1997 brings more change as John Antioco takes over as CEO and revamps the companies motto; at which time the company finally begins a small upturn. Viacom hold their own initial public offering that raised over $465 million. The choice is made to add an online DVD rental service in 2004, to compete with Netflix, and began offering video games in 2010. In an attempt to increase exposure and bring in more customers they partner with Comcast to offer their consumers discounts to the DVD mailing service. In an effort to compete with all the no fee movie rental options entering the market Blockbuster finally drops their late fees in December of 2004; in the same month Blockbuster bids on rival Hollywood Video but loses to Movie Gallery in January 2005. Icahn increases his shares to 9.98 million making him the primary share holder and proceeds to hold a proxy battle that he wins.

Icahn and 2 other nominees are added to the board of directors in May 2005 and Icahn proposes the organization sell to a private-equity firm; meanwhile Antioco is fighting to keep the company independent. In March 2007 Antioco steps down after a disagreement with the board on his 2006 bonus, which had previously been cut by more than half, and is replaced by former head of 7-Eleven, Jim Keyes. Blockbuster partners with NCR to complete with Redbox by installing similar kiosks; they started with 6,000. Icahn begins selling off his shares in January 2010 after stepping down from the board of directors, stating he is in violation of shareholder guidelines because he was holding to many directorships. By the end of June 2010 he only owns 680,000 shares. In an effort to forgo bankruptcy, after announcing in March the possibility to the company, Keyes ends some international operations and closes hundreds of locations. In June Gregory Meyer is accepted onto the board of directors. Meyer had previous experience in the kiosk movie rental business. The stock exchange drops Blockbuster in July 2010 when the shareholders would not approve the recapitalization plan. September 23, 2010 brings Chapter 11 bankruptcy, but vows to continue operating and paying employees through while in court. Between 2008 and December 2010 closed approximately 1,000 underperforming locations. Dish Network won their bid for $320 million April 5, 2011, and has begun the process of incorporating the contracts Blockbuster held into their television satellite services. (Thestreet.com, 2013)

Reed Hastings and Marc Randolph co-found Netflix.com, an online movie rental company, in 1997 and increase their services to offer movie sales in 1998. In 1999 Group Arnault invests $30 million and subsequently a subscription service was implemented that offered one monthly payment for unlimited rentals with no late fees.

The following year Netflix launches a personalized movie recommendation program to improve their customers experience. May 22, 2002 was Netflixs initial public offering that was worth $82,500,000; at the end of 2002 they had 857,000 members which was an 88% increase from the previous year. In 2003 there are not many recorded changes, but members continue to climb to over 1,000,000 (Netflix. 2013) and this is the year Netflix sees its first profitable quarter. (Fundinguniverse.com, u.d.) Marc Randolph left Netflix in 2004 to pursue other investments. (Crunchbase.com, 2013) In an effort to continue satisfying their customers with accurate movie recommendations Netflix offers a prize of $1 million, in 2006, for the first person or team to achieve a program algorithm that hits a predetermined accuracy goal. Team BellKors Pragmatic Chaos won in and was awarded the prize September 21, 2009. (Netflixprize.com, 2013) Netflix live streaming launches in 2007 and ends the year with 7.5 million members, but this is the lowest member increase since its birth at only 18%. In both 2008 and 09 Netflix partners with consumer electronics companies to offer their streaming services through products like Blu-ray players, TV set-top boxes, MAC computers, and various video game console systems; which accomplishes a total increase in members of 57% over the two years. 2010 brought even more partnerships including many Apple products and additional gaming consoles. From 2010 to 2012 Netflix goes global launching their services in Canada, Latin America, Caribbean, U.K., Ireland and the Nordics increasing their member numbers to over 30 million. In 2011 CEO Hastings makes a very costly mistake in prematurely launching a new concept idea, Qwikster, that was later scrapped but had already made a huge effect in members, profits and stock holdings. (Fundinguniverse.com, u.d.)

According to the Redbox official timeline page after being initiated in 2002 by McDonalds Ventures, LLC (Redbox.com, 2013) they started with 2 types of test kiosks under the name Tik Tok DVD Shop and Tik Tok Easy Shop. As the name implies the DVD Shop rented DVDs, the Easy Shop was a machine offering over 200 products from soap to groceries, in 12 McDonalds locations. In 2003 after success with the DVD machines, they expanded to 35 locations in the Washington and Las Vegas areas under the now well-known name Redbox. By 2004 they had 100 locations and kept growing to 1200 by 2005 in major cities all over the U.S. This is where the first major change happens. Coinstar, Inc. a change cashing company that had perfected the kiosk placement business, buys a portion of Redbox and it becomes a separate company. By 2006 there were 1900 machines strategically placed in grocery stores, drug stores and gas stations, in addition to the McDonalds only locations. In 2007 with 6,100 locations they reached their 38 millionth DVD rental, which made them the 5th largest rental company in the country. By 2008 many major movie studios agreed to release their movies to Redbox within 1-28 days of when they were released to the public for sale, which seems like a good idea since they had 12,000 locations by that point. In February 2009 Coinstar, Inc. finally buys the remaining stock and releases test sales in both BlueRay DVD and video games. Advertising Age names Redbox one of Americas Hottest Brands in 2010, and increases from 26,000 to 29,000 kiosks. 68% of Americans live within 5 minutes of a Rebox location. Last year they reached over 2 billion rentals across 31,500 locations and are currently looking at partnering with Verizon to add additional services and opportunities to utilize their services. (Redbox.com, 2013)

Since the changes in these three organizations are companywide, not departmental or individual, it would be necessary for the CEO/President of the organization and its primary shareholders/board of directors to decide what the changes need to be and when to implement them. Therefore in these organizations the director, navigator and interpreter role responsibilities would first fall to the CEO for the most part. While lower level management would still be responsible for applying the interpreter role into their responsibilities as well, throughout there sections. Although the initial notification of changes like expansion, product development or elimination, acquisition or sale, and even change in senior management would be the job of the CEO; the lower level managers must then support and clarify any issues that arise within their teams or departments. It is quite apparent when reviewing the timelines of all three companies that the transition of leadership has played a huge role in how effective or unsuccessful each company has turned out to be.

Every organization faces market, trend, and technology changes. The difference is how each one responds to those changes. In the case of Blockbuster there was a constant turnover rate in senior management which directly impacts the function, trust and effectiveness of its employees. There was more focus and energy spent on finding the best leader that the attention was completely taken off marketing strategy. When you dont develop your product and place in an industry the company becomes sta gnant and boring; consumers demand new and interesting. Although Redbox has had multiple CEOs since its conception their turnover has been considerably less than what we saw from Blockbuster. On the other hand Netflix, while making a key business strategy error in 2011, has maintained growth and profitability since 2003 (Fundinguniverse.com, u.d.)

from what appears to be a direct result of strong and consistent leadership through Hastings their one and only primary CEO. Even though the technology change Hastings attempted was premature and did not have a successful implementation it still shows they understood the need for change and competitive advantage. The only guarantee in business is that at some point you will fail. Its how you react to that failure that will either propel you to success or sink you into total loss. In addition the technology advancements, which is the main focus of the organizational change, that were pursued by all organizations varied but were all explored in an attempt to stay competitively relevant. It can be assumed that many if not all of Blockbusters CEOs were unsuccessful at long term implementation of the responsibilities described in any of the 3 image roles. The director role needs strategy and creativity in order to make decisions throughout the organization. This role is responsible for the success or failure of the entire organization not just themselves. Once those director decisions have been made as the navigator they need to oversee the implementation of those changes in order to ensure they are done correctly and they are prosperous. When Netflixs CEO Hastings announced the Qwixter idea and received such a strong back lash from its members he had to use both his navigator and director roles to make an additional decision to cancel the change and his interpreter role to voice how and why that change would no longer happen.

When Keyes took over the very unpredictable, unfocused, and disjointed Blockbuster he was challenged to use his director role extremely creatively. But ultimately there was not much that could be done at that point to turn the company

around without first hitting rock bottom, bankruptcy. This again was when the navigator and even more so the interpreter role was necessary in order to reassure his employees and communicate the process they were all facing. Upper management is a complicated role because of the demand to fill so many shoes, that is why not everyone is cut out for such a job.

I believe the most important role that any leader must possess in order to effectively handle and communicate organizational change is the interpreter. This job is the most complicated and the most important because if you are not an effective interpreter the consequences can be hi turnover, loss of quality employees, loss in profits and overall business failure. Communication must be managed both internally and externally in very different methods. The way an interpreter must express the changes to his or her employees will be completely different from the way it is presented to the public or the board of directors. Thats why no matter what additional role you must portray the interpreter will always go hand in hand with it.

References

Crunchbase.com (2013) Marc Randolph. Retrieved from:

http://www.crunchbase.com/person/marc-randolph

FundingUniverse.com (u.d.) Netflix, Inc. History, Retrieved from:

http://www.fundinguniverse.com/company-histories/netflix-inc-history/

Marcus, M., Schaefer, S. (2011) A Timeline: The Blockbuster Life Cycle, Retrieved

from: http://www.forbes.com/2010/05/18/blockbuster-netflix-coinstar-marketsbankruptcy-coinstar_slide_5.html

Netflixprize.com (2013) http://www.netflixprize.com/

Redbox.com (2013) Timeline. Retrieved from: http://www.redbox.com/timeline

Redbox.com (2013) Timeline. Retrieved from: http://redboxpressroom.com/factsheets/TheHistoryofRedbox.pdf