Consider, for example, the near-suicidal decision of Blockbuster Entertainment in 1998 to turn down Warner Bros.' offer to entrench a DVD rental window. Warren Lieberfarb, who headed Warner Bros.' home video division, which, along with Sony, then provided the vast majority of DVD titles, offered Blockbuster CEO John Antioco a deal to insulate the rental business from retail competition by delaying putting DVDs on sale for a few weeks after their release. Warner Bros. (and presumably the other studios) would provide rental copies of new titles on DVD to the 10,000 Blockbuster stores and, in return, receive 40 percent of the rental revenues that Blockbuster earned from them.
At the time, Blockbuster was a powerhouse, accounting for nearly 50 percent of the studios' video revenue. Indeed, Sumner Redstone, the CEO of Viacom (which owned Blockbuster), had told Lieberfarb, "The studios can't live without a video rental business—we are your profit." Yet, even though Lieberfarb was only asking that the 40 percent revenue-sharing arrangement that Redstone himself had pioneered for video be extended to DVD, Antioco turned him down. Warner Bros.' response was to offer DVDs as a traffic-builder to Wal-Mart, Best Buy, and other mass retailers. As it turned out, the studios could not only live without a video rental business, they could thrive. By 2004, the studios were raking in $20.7 billion a year from DVDs while Blockbuster Entertainment, its rental business decimated, was hemorrhaging losses. Why did Antioco turn down Lieberfarb's offer? According to an insider privy to the Warner Bros.-Blockbuster negotiations, Antioco's decision proceeded not from any financial analysis of the offer's merits but from his "massive ego," which made it difficult for him to accept Lieberfarb as an equal in the negotiations.
Customer: I'm looking for a copy of 8 1/2.
Clerk: Yessir! Is it a new release, sir?
Customer: No, it's the classic Italian film.
Clerk: Let me look that up on the computer for you, sir!
[fiddles with computer]
Clerk: Yes, here it is - 9 1/2 Weeks with Mickey Rourke. It's in our "Erotic Dramas" section.
Customer: No, not "9 1/2", 8 1/2, the Fellini film.
Clerk: I'll check that for you sir. How do you spell the actor's name - F-I-L-E-E-P-E-E...?
My first job was in a Blockbuster. Actually, it was for Erol's Video.
So he joined Blockbuster's attempted-Netflix-killing plan of renting as much as you want, as often as you want, for a monthly fee.
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