"3,000 stores, I believe that's the optimal number for Blockbuster's domestic chain in the United States. Blindly pursuing market share is unwise—it would only lead us to waste resources and capital in low-return areas. By optimizing the planned 3,000 video rental stores, I hope Blockbuster can achieve a 50% market share domestically within the next three years."
The video rental industry in the United States had grown rapidly in recent years, expected to surpass $10 billion in sales this year, equivalent to twice the domestic box office revenue.
If Blockbuster could capture 50% of the market share, it would become a colossal industry giant, generating annual revenues of $5 billion with profits around $500 million. Its market value could easily break through $10 billion.
Inside Office LOFT number three at Daenerys Studios.
Simon, hearing Nancy's plan, said, "If your target can indeed be achieved, perhaps I should buy out the remaining shares of Blockbuster now."
"I've calculated it," Nancy's slender fingers traced figures on the tabletop. "Blockbuster's current market value is around $3.2 billion. With the ongoing war in the Gulf, it might drop below $3 billion soon. If we go for a full acquisition, we could offer between $4.5 and $5 billion. We'd actually need to pay around $3 billion in cash."
Simon eyed Nancy's delicate hand and smiled, "You know, I've been brewing a big acquisition plan recently."
Nancy felt Simon's gaze and rolled her eyes, seeing that the man showed no sign of discomfort, she did not avert her eyes but instead took a sip of her coffee, "Those two things aren't necessarily in conflict. Even if your funds are insufficient, wouldn't it be easy to secure a few billion dollars from banks?"
The debt crisis that erupted at the end of last year caused North American banks to tighten credit, significantly increasing the difficulty for many companies to secure loans. However, for a prime borrower like Simon, he had become a favored lending target among major banks.
Simon could even raise $10 billion without much difficulty.
"That's true," Simon admitted. "But apart from Universal, I'm considering some other things, equally costly big plans with a higher return rate than Blockbuster, so this has to take a back seat."
Dealing with acquisitions involving billions of dollars, Nancy didn't expect Simon to agree immediately. Curious about his other plans, she asked, "Like what?"
Simon shook his head: "Can't tell you."
Nancy, slightly dissatisfied, protested, "Boss, don't you trust me?"
"Of course, I do," Simon affirmed. "But trust also needs to be maintained. The key point is, if it's not necessary, don't easily give others a chance to break that trust."
Nancy nodded in understanding, "Okay, I won't ask further."
"Then, let's talk about overseas," Simon continued. "I've noticed Blockbuster's international expansion seems a bit slow. Video rental stores, unlike cinema chains, face few government regulations and trade barriers abroad. Since we plan to grow big, international expansion should also be crucial."
Compared to the over 2,000 stores Blockbuster would have in the U.S. by the end of the year, its international presence was modest—limited to small-scale setups in neighboring countries and the UK, France, Germany, Italy, and Spain in Europe. Apart from Canada, where development was in line with North America, the total number of stores abroad didn't even reach 200, mostly concentrated in major cities like London, Paris, and Berlin.
"Those overseas branches are just for market exploration; initial market research and data analysis are crucial. Once these are complete and funding is sufficient, international expansion can proceed as rapidly as in North America. Also, I plan to connect all Blockbuster stores in the Boston-Washington corridor on the East Coast to the Internet and restructure Blockbuster's membership system. There's a lot to do, so we can't divert too much attention to overseas markets right now."
"As long as you're aware," Simon nodded, then cautioned, "And don't take on everything yourself. Delegate what can be handled by Wayne Huizenga and James Frey."
Though Blockbuster was an important subsidiary under Daenerys Entertainment, Simon was very confident in the company due to the presence of people like Nancy Brill and Wayne Huizenga, and apart from significant financial and personnel changes, he generally did not interfere with Blockbuster's operations.
"I understand."
Nancy, recalling something, gestured to her assistant nearby, gave a few instructions, then turned to Simon explaining, "Speaking of Blockbuster's membership system, I'd like your input on any improvements. Also, that 'Dune' video game has started internal testing. I'll get a copy for you."
Seeing the petite woman ready to exploit her boss unabashedly, Simon remarked
, "I'm worth hundreds of thousands a minute; you really shouldn't bother me with this."
Real-time strategy games, from the era of standalone PC games in the '90s to the online gaming era of the new millennium, had always been an important category. Years later, games like "World of Warcraft" and "League of Legends," both hugely popular online phenomena, would all have connections to real-time strategy games.
Therefore, Simon had been closely following the development of "Dune," as it was tied to many future plans.
As for Blockbuster's membership system, he was less inclined to discuss it.
There were plenty of people at Blockbuster to handle that.
Nancy, not grasping the joke about his minute-by-minute worth, said, "Just looking for any good ideas you might have. Of course, we'll handle the details. I find that you always manage to come up with novel ideas that break the usual boundaries of thought, which is quite enviable."
"Is that a compliment? I don't quite feel it myself."
Nancy explained, "The DC movie universe, just that plan alone, do you realize how stunning it is? If next year's two movies succeed, this strategy might even be included in Harvard Business School's case studies."
Simon smiled, "Well, I guess I am pretty impressive."
Nancy rolled her eyes at him again.
The assistant quickly brought over a folder and a copy of the "Dune" game disk.
Simon set the game disk aside and opened the folder, while Nancy said, "We're planning to introduce two tiers of membership—basic and premium. We'll offer member discounts, extended tape return periods, reduced penalties, and consider monthly or annual subscriptions."
As Simon asked Nancy's assistant to fetch him another bottle of water, he began to review the membership plan in front of him.
Nancy didn't waste time either, flipping through another document. Noticing her assistant had brought a bottle of mineral water, she made conversation, "I often see you only drinking water, why not coffee anymore?"
Simon, without looking up, replied, "Janet and I are planning to have a child, and coffee isn't good for that."
Nancy was puzzled, "Does coffee affect the child?"
"It has a significant impact, so you might need to be careful too."
"I have no plans to marry."
"Not marrying doesn't mean you can't have children."
"Having kids is troublesome; if needed, I'd consider adoption."
"Having your own children is better."
Nancy thought of something and retorted, "That's very patriarchal."
Simon, confused, "Do these two things have a causal relationship?"
"Yes!"
"Alright, I'm a patriarch."
Both fell silent for a while until Simon said, "These plans all look good. To see how effective they are, like you just said about the international pilot, why not try them in a few states' stores first? If viable, we can roll them out nationally; if not, we just cancel them. This is the advantage of a large corporation; it has a strong margin for error. Not just for the membership system, any good idea can be tested in some regions."
Nancy thought for a moment, then started taking notes.
Simon chuckled, "Is that serious? Didn't you think of it?"
"I thought of the first half, not the second," Nancy said, quickly jotting down some notes before looking up, "Anything else?"
"About value-added services for members," Simon asked, "Have you personally rented videotapes from a Blockbuster store?"
"Of course, every week."
"Do you find it inconvenient?"
"Inconvenient?"
"Have you never thought about home delivery?"
Nancy pondered for a moment, "It's too costly. Selecting films, remote reservation, logistics—it's all very problematic."
"In the short term, we could use phone reservations. As for logistics, we might collaborate with the postal system; the federal postal system is very well-developed, and they probably wouldn't mind an extra bit of business. Sign a contract for annual orders with local postal systems, then Blockbuster can break free from the chain store model. A city would only need a few large warehouse and logistics centers."
Nancy's face showed unconcealed surprise, "That would be revolutionary. If we actually did that, our existing chain store system would collapse."
Simon shrugged, "If I can think of it, others might too. Would you rather Blockbuster disrupt itself or be disrupted by someone else?"
Nancy furrowed her brows, considering for a moment, "Such a service involves too many complex steps and needs a large enough scale to be economically feasible. Smaller video rental chains couldn't afford to do this. For us, it might not be necessary either. Our stores are carefully selected and continuously optimized to maximize convenience for users. They can easily stop by and pick up tapes on their way home from work without needing remote delivery. But you mentioned 'short-term,' is there a
long-term plan?"
Simon wasn't surprised by Nancy's skepticism.
A Netflix-like model in an era still reliant on phone reservations would indeed be challenging to implement, and even in the internet age, Blockbuster would naturally resist such a business model to protect its chain store system.
"Long-term, if the number of internet users grows large enough, Blockbuster could set up its own online site where users can search and reserve tapes themselves, like a library's electronic book search system. This would solve the issues of film selection and remote reservation, offering higher security and convenience. Users could receive tapes through the postal system, watch them, and then simply mail them back in a special Blockbuster package, all without leaving home."
"If I'm not mistaken, the number of online users in the U.S. this month should just reach 150,000. How many years do you think it would take to reach a sufficient scale?"
"The proportion of American homes with VCRs went from 2% to 70% in just ten years; I believe the internet can reach this level of prevalence in at most the same time."
"The idea of developing business through the internet is great, but even if your prediction comes true, we'd still have to wait at least five years. A 2% VCR penetration rate didn't give rise to a Blockbuster," Nancy said, then suddenly changed the subject, her gaze intently fixed on Simon, "Boss, I'm very curious, where do all these advanced ideas of yours come from?"
Simon was not the first to face this question; Janet's piercing gaze had been far more lethal. Thus, he responded calmly, "This particular idea was told to me by a guy named Reed."
"Reed?"
"Yes," Simon nodded, gesturing toward the empty space beside Nancy, adopting a slightly eerie tone, "He's sitting right beside you."
Nancy turned to look at the air next to her, her tone displeased, "Hey, Reed, can you sit across from me? I dislike men."
The petite woman solemnly played along with Simon's attempt at humor, neither of them laughing, yet leaving Jennifer Lebenthal and Sheryl Lansing, who happened to walk by, completely baffled and a bit unnerved.
What in the world?
Seeing Jennifer and Lansing, Nancy stuck out her tongue and greeted the two women before explaining, "Just a joke." She stood up, pointed to the "Dune" game disk beside Simon, and said, "I have to get back to work. Remember to email me after you try the game."
Once Nancy had left, Jennifer spoke up as Simon stood, "Ms. Lansing has been waiting a while, so I brought her here."
Simon checked his watch.
He had scheduled a meeting with Sheryl Lansing at 2:30 PM to discuss Daenerys's collaboration with MGM. Having finished the meeting at Marvel a bit early, he hadn't rushed back to the administrative area, not realizing that his chat with Nancy had stretched into three o'clock.
Apologizing, he sat down and asked Lansing, "Have you read the script for 'Few Good Men'?"
In recent days, Johnston Holdings in Australia had begun taking over Qintex Group's Channel Seven, and Daenerys Entertainment's collaboration with MGM was progressing steadily.
In Simon's view, the critical issue for MGM was to avoid being sold off repeatedly like in the 1980s. With a stable environment for growth, rebounding in the global expansion of Hollywood in the 1990s wouldn't be difficult.
At the very least, with patient management, they could sell the company at a very good price in a few years in Australia.
As for the two planned collaborative films, Simon was dissatisfied with several projects proposed by MGM, eventually deciding to use a freshly acquired script from Daenerys, "Few Good Men."
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