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As Of Filer Filing For·On·As Docs:Size Issuer Agent 11/08/07 Blockbuster Inc 8-K:7,9 11/08/07 2:10M RR Donnelley/FA |
Document/Exhibit Description Pages Size 1: 8-K Current Report HTML 16K 2: EX-99.1 Blockbuster Inc. Presentation, Dated November 8, HTML 288K 2007
Blockbuster Inc. Presentation, dated November 8, 2007 |
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2 BLOCKBUSTER These slides are provided as part of Blockbuster's presentation and should be viewed in
the context of the presentation and Blockbuster's most recent Form 10-K,
Form 10-Q and Form 8-Ks filed with or furnished to the Securities and Exchange Commission ("SEC"), all of which can be found on the Investor Relations section of www.blockbuster.com.
This presentation includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements that do not relate strictly to
historical or current facts are forward-looking, including those regarding our operations, strategies, initiatives and investments, objectives, plans, goals and
business and financial outlook. These forward-looking statements
are based on management's current intent, belief, expectations, estimates and projections regarding our company and our industry. They are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict. Actual results may vary materially from those expressed in or indicated
by the forward-looking statements due to a variety of factors, including: (1) consumer appeal of our existing and planned product and service
offerings, and the related impact of competitor pricing and product and service offerings; (2) overall industry performance and the accuracy of our estimates
and judgments regarding trends impacting the home video industry; (3) our ability to obtain favorable terms from suppliers, including on such matters as copy depth and uses of product; (4) the studios’ dependence on revenues generated from retail home video and their related determinations
with respect to pricing and the timing of distribution of their product; (5)
the variability in consumer appeal of the movie titles and games software released for rental and sale; (6) our ability to comply with operating and financial restrictions and covenants in our debt agreements, which ability
could be impacted by, among other things, any industry performance that
differs from our expectations, and any adverse publicity relating thereto; (7) our ability to respond to changing consumer preferences, including with respect to new technologies and alternative methods of content delivery,
and to effectively adjust our offerings if and as necessary; (8) the
extent and timing of our continued investment of incremental operating expenses and capital expenditures to continue to develop and implement our initiatives and our corresponding ability to effectively control overall operating
expenses and capital expenditures; (9) our ability to effectively and timely
prioritize and implement our initiatives and to timely implement and maintain the necessary information technology systems and infrastructure to support our initiatives; (10) our ability to capitalize on anticipated industry
consolidation; (11) the application and impact of future accounting policies or interpretations of existing accounting policies; (12) the impact of developments affecting our outstanding and any future litigation and claims against us; (13) shifts in strategy in connection with recent changes in
the composition of our key management; and (14) other factors, as described in our filings with the Securities and Exchange Commission, including the factors discussed under the heading “Risk Factors” in our annual report on
Form 10-K for the year ended 31, 2006 and under the heading “Disclosure Regarding Forward-Looking Information” in our quarterly report on Form 10-Q for the quarter ended July 1, 2007. The forward-looking statements in this presentation are made only as of the date of
this presentation and we undertake no obligation to update publicly any
forward-looking statement for any reason, even if new information becomes available or other events occur in the future. Forward-Looking Statements |
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4 BLOCKBUSTER Share Shift Continues…BBI Remains Market Share Leader 2004 2007E NFLX 13.1% BBI 33.1% Independents 23.5% MOVI 6.3% Vending 3.4% HLYW 11.6% BBI 31.6% MOVI 6.2% Independents 35.4% Vending 0% NFLX 5.3% HLYW 8.7% Source: Blockbuster estimates VOD 9.9% VOD
11.9% |
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5 BLOCKBUSTER Channel Shift Has Also Occurred 2004 2007E By- Mail 19.1% Stores 65.6% Vending 3.4% Stores 84.8% Source: Blockbuster estimates By- Mail 5.3% VOD 9.9% VOD 11.9% |
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6 BLOCKBUSTER 8.0 7.3 6.8 6.3 0.5 0.9 1.3 1.8 4.0 5.0 6.0 7.0 8.0 9.0 2004 2005 2006 2007E Subscription Traditional Domestic Rental Industry Remains Flat Domestic Rental Industry Revenues 2004-2007; Billions Source: Average of Adams Media Research 8/31/07 and Kagan
5/24/07 $8.5 $8.2 $8.0 $4.5 $4.7 $5.0 $5.6 Estimated Gross Profit $8.1 |
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7 BLOCKBUSTER State Of The Company 2004 2007 LTM $5.9B $5.5B Total Revenues 2004 and 2007LTM; Billions 2004 2007 LTM $508.4M $204.9M EBITDA 2004 and 2007LTM; Millions Note: Please refer to the appendix for the required reconciliation of non-GAAP financial measures
|
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8 BLOCKBUSTER • • Home Video Home Video Rental Rental Window Window (45-Day) Consumer Opportunity Execution Weakness Strategic Response • • “Managed “Managed Dissatisfaction”New Releases Dissatisfaction”New Releases • • Out Of Stock On Out Of Stock On |
PAGE 11 BLOCKBUSTER • • Customer Customer Complaints Complaints On Excessive On Excessive Late Fees Late Fees Consumer Opportunity Execution Weakness • • Depleted Depleted Inventory Inventory • • Opportunity Opportunity Cost Cost
Strategic Response |
PAGE 14 BLOCKBUSTER Rental Pricing Model Day 1 Day 3 Day 10 Day 33+ Rental Timeline: Rent Hot New Release “Transformers” Movie Due Back; Free Grace Period Begins Free Grace Period You Own The Movie Now Return Product For $1.25 Restocking Fee |
PAGE 15 BLOCKBUSTER Economic Impact 2004 2007 Average Rental Pricing 2004 2007 Days Out $3.60 $2.79 3.6 Price Days Out 5.0 |
PAGE 17 BLOCKBUSTER • • New Demand New Demand DVDs By- DVDs By- Mail Mail Consumer Opportunity Execution Weakness • • Inventory Inventory Depletion From Depletion From Free Exchanges Free Exchanges • • Cost Of Heavy Cost Of Heavy Users
Users Strategic Response |
PAGE 18 BLOCKBUSTER Rental By-Mail Channel Growth By-Mail Channel Paid Subscriber Additions 2006-2007YTD; Thousands -220 -20 180 380 580 780 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 BBI NFLX Launched BLOCKBUSTER Total Access |
PAGE 19 BLOCKBUSTER BLOCKBUSTER Total Access Price Modification Most Profitable Least Profitable Forced Attrition of Unprofitable Customers Note: For Illustrative Purposes Only Average Monthly Profit Per Subscriber Average Monthly Profit Per Subscriber Before Changes To BLOCKBUSTER Total Access After Changes To BLOCKBUSTER Total Access Most Profitable
Least Profitable |
PAGE 20 BLOCKBUSTER Customer Migration Model—Old Strategy Blockbuster Competitive Advantage: None Horizontal Migration Model— Perception Horizontal Migration Model— Reality Store Online Digital Time Store By-Mail Digital Unknown timetable for commercial model in digital download |
PAGE 21 BLOCKBUSTER Physical DVD Store Vending By-Mail Vertical Customer Migration Model—New Strategy Mobile Digital In-Store Kiosk Kiosk Download To PC Potential Partners Blockbuster Competitive Advantage: • Digital Capability (Movielink) • Consumer Brand Awareness • Content Aggregation • Store Presence At
Home Digital + + + |
PAGE 23 BLOCKBUSTER New Paradigm BLOCKBUSTER Total Access BLOCKBUSTER Total Access In-Store In-Store Movielink Movielink BLOCKBUSTER Movie Pass BLOCKBUSTER Movie Pass Games Games Mail Mail BLOCKBUSTER Rewards BLOCKBUSTER Rewards International International
By-Mail By-Mail Digital Digital |
New Competitive Landscape
Mail Mail Netfix By-Mail Netfix By-Mail Netflix Digital Netflix Digital Amazon Amazon redbox redbox CinemaNow CinemaNow Best-Buy Best-Buy Vudu Vudu Movie Gallery Movie Gallery BLOCKBUSTER Total Access BLOCKBUSTER Total Access In-Store In-Store Movielink
Movielink BLOCKBUSTER Movie Pass BLOCKBUSTER Movie Pass Games Games BLOCKBUSTER Rewards BLOCKBUSTER Rewards International International |
PAGE 25 BLOCKBUSTER The New Blockbuster Restore Core Rental Business Rental To Retail Transition DVD To Digital Transformation |
PAGE 27 BLOCKBUSTER …A New Blockbuster Mission-From A DVD Rental Company…To… …Convenient Access To Media Entertainment |
PAGE 28 BLOCKBUSTER Transformation Process… Strategic Roadmap Restore Core Rental Business Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview |
PAGE 29 BLOCKBUSTER Restore Core Rental Business Transform And Respond To Changing Customer Needs For Media Entertainment • • In-Stock On New In-Stock On New Releases Releases • • Prequels/Sequels Prequels/Sequels |
PAGE 30 BLOCKBUSTER Restore Core Rental Business Transform And Respond To Changing Customer Needs For Media Entertainment • • In-stock On New In-stock On New Releases Releases • • Prequels/Sequels Prequels/Sequels • • New/Exclusive New/Exclusive Content Content |
PAGE 31 BLOCKBUSTER Restore Core Rental Business Transform And Respond To Changing Customer Needs For Media Entertainment • • In-Stock On New In-Stock On New Releases Releases • • Prequels/Sequels Prequels/Sequels • • New/Exclusive New/Exclusive Content Content • • Seasonal/Event Seasonal/Event
Based Based |
PAGE 32 BLOCKBUSTER • • In-Stock On In-Stock On New Releases New Releases Restore Core Rental Business Transform And Respond To Changing Customer Needs For Media Entertainment |
PAGE 33 BLOCKBUSTER Strategic Roadmap Core Rental Business Enhancements Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview Transformation Process… |
PAGE 34 BLOCKBUSTER • • Sell DVDs And Sell DVDs And Games Games Rental To Retail Transition Transform And Respond To Changing Customer Needs For Media Entertainment
|
PAGE 35 BLOCKBUSTER Rental $2,000 Rental $2,000 Retail $300
Retail $300
We Are Focusing On Balancing Our Rental And Retail Dollars Per Day Note: For Illustrative Purposes Only |
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36 BLOCKBUSTER Rental 20% Retail 80% Rental 70% Retail 30% $2,320 Per Day Industry Shipments Blockbuster Opportunity Lost Shrek Example Note: For Illustrative Purposes Only |
PAGE 37 BLOCKBUSTER • • Sell DVDs And Sell DVDs And Games Games • • Test PS3 Movie Test PS3 Movie Station Station Rental To Retail Transition Transform And Respond To Changing Customer Needs For Media Entertainment |
PAGE 38 BLOCKBUSTER Rental To Retail Transition Transform And Respond To Changing Customer Needs For Media Entertainment • • Sell DVDs And Sell DVDs And Games Games • • Test PS3 Movie Test PS3 Movie Station Station • • Test Portable Test Portable Devices Devices |
PAGE 39 BLOCKBUSTER Rental To Retail Transition Transform And Respond To Changing Customer Needs For Media Entertainment • • Sell DVDs And Games Sell DVDs And Games • • Test PS3 Movie Station Test PS3 Movie Station • • Test Portable Devices Test Portable Devices • • Test Merchandise Test Merchandise Related Product Related
Product |
PAGE 40 BLOCKBUSTER Rental To Retail Transition Transform And Respond To Changing Customer Needs For Media Entertainment • • Sell DVDs And Games Sell DVDs And Games • • Test PS3 Movie Station Test PS3 Movie Station • • Test Portable Devices Test Portable Devices • • Test Merchandise Test Merchandise Related Product Related
Product • • Develop Merchant Develop Merchant Culture Culture |
PAGE 41 BLOCKBUSTER Strategic Roadmap Core Rental Business Enhancements Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview Transformation Process… |
PAGE 42 BLOCKBUSTER • • Merge Movielink Merge Movielink And And Blockbuster.com Blockbuster.com • • Build Digital Build Digital Distribution Distribution DVD To Digital Transformation Transform And Respond To Changing Customer Needs For Media Entertainment |
PAGE 43 BLOCKBUSTER • • Merge Movielink And Merge Movielink And Blockbuster.com Blockbuster.com • • Build Digital Build Digital Distribution Distribution • • Kiosk Kiosk Development Development DVD To Digital Transformation Transform And Respond To Changing Customer Needs For Media Entertainment |
PAGE 44 BLOCKBUSTER • • Merge Movielink And Merge Movielink And Blockbuster.com Blockbuster.com • • Build Digital Build Digital Distribution Distribution • • Kiosk Development Kiosk Development • • Potential Potential Partners To Partners To Home Home
• • Telecom /Cable Telecom /Cable /Satellite /Satellite DVD To Digital Transformation Transform And Respond To Changing Customer Needs For Media Entertainment |
PAGE 45 BLOCKBUSTER Facebook.com Facebook.com and blockbuster.com Movie sharing amongst Facebook friends Rent directly from Facebook(full queue management) Socially-driven acquisition campaign driven by blockbuster.com users with Facebook accounts Install Movie Clique on Facebook Share movie ideas with friends via News Feeds Link blockbuster.com account to share existing
movie lists and build your queue User’s blockbuster.com activities are broadcast to the user’s Facebook friends Prominent and guaranteed placement of blockbuster.com user events on Facebook News Feeds Subscriber acquisition (soft sell) Subscriber retention Movie Clique Application Subscriber acquisition Branding Newsfeed Beacon Integration Where? What? How? Why? |
PAGE 46 BLOCKBUSTER The News Feed Integration Is Driven By blockbuster.com Users Feeding Their Activities To Their Facebook Friends Facebook Friends Blockbuster Members |
PAGE 48 BLOCKBUSTER Strategic Roadmap Core Rental Business Enhancements Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview Transformation Process… |
PAGE 49 BLOCKBUSTER Previous Organizational Structure The prior organizational structure consisted of only a few direct reports to the CEO Chairman & CEO CFO & CAO COO Corp Comm Finance & Acctg Controller Finance Tax & Treasury Investor Relations HR & Admin IT Internal Audit Legal GM BB Online US Operations General Merch Mgr CMO US
Stores Franchise & Dev Canada Europe Mexico Australia/Asia Community Affairs Event Services Strategic Planning Market Intelligence |
PAGE 50 BLOCKBUSTER Chairman & CEO Media Dev. & Studios CMO Digital Store Ops HR Int’l CFO Merch., Log. & Distrib. CIO GC New Executive Leadership and Structure & Team |
PAGE 51 BLOCKBUSTER Strategic roadmap Core rental business enhancements Rental to retail transition DVD to digital transformation Implementation Steps Leadership Team Cost Reductions Asset management Financial Overview Transformation Process… |
PAGE 52 BLOCKBUSTER Cost Reduction Proposal • We reduced our G&A run-rate by approximately $45 million • The Everest Group has been retained to evaluate the potential outsourcing of key overhead areas Compensation Other G&A Outsourcing Opportunities And Advertising $20M $25M Note: For Illustrative Purposes Only Cost Structure |
PAGE 53 BLOCKBUSTER Strategic Roadmap Core Rental Business Enhancements Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview Transformation Process… |
PAGE 55 BLOCKBUSTER Store Efficiency $158 $132 2004 2007 LTM Annual Total Revenue Per Square Feet Per Store |
PAGE 56 BLOCKBUSTER Store Efficiency 2004 2007 LTM Annual Total Revenue Per Square Feet Per Store $158 $132 $4,000 |
PAGE 59 BLOCKBUSTER Concept 1: A Better Blockbuster Key Points: • Update image of traditional business • Improve customer experience and product merchandising • Create basis for other retail concepts |
PAGE 61 BLOCKBUSTER Concept 2: Beverage Lounge Key Points: • Lounge creates a destination for an enjoyable entertainment browsing experience • Broader definition of entertainment • Additional products will include books and magazines |
PAGE 63 BLOCKBUSTER Concept 4: Tech Key Points: • Make Blockbuster a destination for media entertainment and the latest, primarily portable, entertainment devices • Product: Portable devices that play music and video pre-loaded with content, devices pre-selected to solve entertainment access problems such as home theater in a box |
PAGE 65 BLOCKBUSTER Concept 5: Kids Key Points: • Create a destination for family-friendly browsing and purchasing of entertainment, with a focus on kids • Product would include entertainment-related toys and games, kids’ videos, etc. |
PAGE 67 BLOCKBUSTER Strategic Roadmap Core Rental Business Enhancements Rental To Retail Transition DVD To Digital Transformation Implementation Steps Leadership Team Cost Reductions Asset Management Financial Overview Transformation Process… |
PAGE 68 BLOCKBUSTER Opportunity For EBITDA Recovery $611M Average Annual EBITDA 2002-2004 2007 EBITDA “No Late Fees” BLOCKBUSTER Total Access Note: For Illustrative Purposes Only Note: Please refer to the appendix for the required reconciliation of non-GAAP financial measures
|
PAGE 69 BLOCKBUSTER 2007 And Beyond 2007 EBITDA Future G&A Reduction Further Cost Reductions New Revenue Streams Rental Retail Digital Pricing In-store By Mail Note: For Illustrative Purposes Only |
PAGE 70 BLOCKBUSTER We Believe We Can End 2007 Operating Within Th Requirements Of Our Credit Facility Margin G&A Revenue Comps BLOCKBSUTER Total Access Economics Continue To Improve BLOCKBSUTER Total Access Economics Continue To Improve Box Office Is Up 14.3% Traffic Expected To Be Higher Box Office Is Up 14.3% Traffic Expected To Be Higher $165M Minimum LTM EBITDA
Excluding In-Store Exchange Costs, Improved Online Profitability is Offsetting In-Store Profit Decline $45 Million G&A Savings Run-Rate Starts In Q4 $45 Million G&A Savings Run-Rate Starts In Q4 |
PAGE 71 BLOCKBUSTER Impact of BLOCKBUSTER Total Access On Rental Domestic Gross Profit Q1 07 Q2 07 Q3 07 $35M $29M $50M $10-20M • Pricing changes to BLOCKBUSTER Total Access are improving economics • We are committed to making the BLOCKBUSTER Total Access offering profitable early next year Note: For Illustrative Purposes Only |
PAGE 72 BLOCKBUSTER We Realigned Our Strategy To Focus On And Maximize The Profitability Of All Consumer Segments 28-Day In-Store Active BLOCKBUSTER Total Access Subscriber Current Monthly Marginal Profitability Per Customer 28-day In-Store Actives Vs. BLOCKBUSTER Total Access Subscriber $4.26 $9.72 |
PAGE 73 BLOCKBUSTER Disciplined Approach To Growth Growth Return 2004 Future 2007 2006 High Low Low High |
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74 BLOCKBUSTER Our New Strategy Requires Organizational Realignment And Tremendous Focus On Execution Reduce costs Enthusiastic organizational support Focus on most important initiatives Realign resources to support new strategy New Leadership Team Successful Strategy Execution |
PAGE 75 BLOCKBUSTER Blockbuster – Shareholder Value Focused •Driving Performance In Our Core Business •Increasing Efficiency •Return on Assets Financial Flexibility Earnings Power Total Returns • EBITDA • EPS • Cash Flow •
ROIC • Total Return To Shareholders • Achieving appropriate capital structure • Total Debt/EBITDA • Total Debt/Enterprise Value •Executing On Profitable Growth Initiatives |
PAGE 77 BLOCKBUSTER Reconciliation of Net Income To EBITDA Twelve Months Ended September 30, December 31, December 31, December 31, December 31, 2007 2006 2005 2004 2003 2002 Net income (loss) (103.8) $ 54.7 $
(588.1) $ (1,248.8) $ (978.7) $ (1,621.1) $ Adjustments to reconcile net income (loss) to EBITDA: (Income) loss from discontinued operations, net of tax 1.1 13.2 39.8 (4.9) 23.8 (0.4) Cumulative effect of change in
accounting principle - - - - 4.4 1,817.0 Equity (income) loss of affiliates - - - - 0.7 2.2 (Benefit) provision for
income taxes 30.5 (76.4) 63.3 (20.8) 114.1 108.1 Other items, net (1.9) (4.1) 2.4 (1.6) 0.4 (2.9) Interest income (7.7) (9.9) (4.1) (3.6) (3.1) (4.1) Interest expense 89.9 101.6 98.7 38.1 33.0 49.5 Depreciation and amortization of
intangibles 191.7 208.6 226.6 247.3 264.4 238.0 Impairment of goodwill and other long-lived
assets 5.1 5.1 341.9 1,502.7 1,280.8 - EBITDA 204.9 $
292.8 $
180.5 $
508.4 $
739.8 $
586.3 $
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This ‘8-K’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/31/07 | 11-K | |||
Filed on / For Period End: | 11/8/07 | |||
7/1/07 | 10-Q | |||
12/31/06 | 10-K, 11-K | |||
List all Filings |