New Kid on the Block, Buster
A FLORIDA MOGUL DREAMS DREAMS OF AN EMPIRE
It’s, say, 1995 and the Blockbuster megastore near you is hopping. Flashing your Blockbuster frequent-shopper card, you rent a videocassette, then scrutinize the potential freebies. More video rentals? A ride on a pricey video simulator in a corner of the store? A ticket to see baseball’s Florida Marlins? Or how about a rock concert at a Blockbuster-operated theater?
Talk about one-stop shopping. This new explosion of cross-promotion may come soon, courtesy of H. Wayne Huizenga, 55, the tough-talking, Ft. Lauderdale chairman of Blockbuster Entertainment. Eighteen months ago Huizenga was struggling: analysts feared that cable TV movies would eventually make a trip to one of his video stores as obsolete as an evening at the drive-in. Now Blockbuster is more profitable than ever, and Huizenga has moved aggressively into the music and multimedia businesses. More recently he’s dominated the sports pages with purchases of baseball and hockey expansion teams, moves Huizenga hopes will fit nicely into his other holdings.
Not bad for a guy who started out as a garbage collector on the streets of Ft. Lauderdale. In the 1960s Huizenga built a tiny trash-hauling business into Waste Management Corp., a sanitation-and pollution-cleanup giant. He stepped down as vice chairman in 1984 to try new ventures; although he rarely went to a movie, and didn’t own a VCR, a colleague sold him on the potential of the video business. In 1987 Huizenga and several others paid $18.5 million for a stake in a small Dallas video chain. Compared with the moms and pops that dominated the industry, Huizenga offered huge selections, banned sex videos to attract families and offered convenient three-day, $3 rentals. Blockbuster grew to 3,000 stores-bigger than the next 300 chains combined.
But by 1991 it was apparent that videos wouldn’t be enough. Analysts worried that over the long haul, the billion-dollar company couldn’t compete with pay-per-view movies on cable TV. Its stock, now about $20 a share, plummeted to about $8. Huizenga worked quickly, though, to restore Wall Street’s confidence. He slashed costs-which helped boost last year’s earnings by some 50 percent-and opened a slew of new stores. Huizenga also diversified by purchasing the 236-store Sound Warehouse and Music Plus chains and formed a partnership with London-based Virgin Retail. Together they are building megastores that will offer everything from books and coffee bars to virtual-reality games that simulate airplane rides. In one of his most highly publicized moves, Huizenga spent $25 million of his own money on a National Hockey League franchise. And this spring the Florida Marlins take the field at Miami’s Joe Robbie Stadium-50 percent owned by Huizenga.
Huizenga’s latest ventures create tantalizing cross-marketing possibilities-the holy grail of entertainment companies such as Time Warner. He likens the company’s Blockbuster cards, distributed to its 30 million members, to frequent-flier memberships, which could entitle customers to discounts and freebies-like concerts in newly built Blockbuster amphitheaters in Phoenix, Ariz., and in Charlotte, N.C. And he is eager to make use of a 30 million-name database. His sports ventures, too, could be part of the plan. Some suggest he might package his athletes in snazzy videos marketed at Blockbuster outlets. “I could envision the day when you can turn on the cable and see the Blockbuster channel,” Huizenga adds. Central to the strategy is exploiting the Blockbuster name, which could appear on as many as 5,000 stores worldwide by 1995. “Blockbuster is becoming-very deliberately-a brand name like McDonald’s or Coke,” says Merrill Lynch’s Charles Lewis, a friend of Huizenga’s.
While rival retailers await Huizenga’s next move, the Floridian is already ruffling feathers in the sports business. Last year the city of St. Petersburg, Fla., and a syndicate of would-be baseball-team owners sued Huizenga and other investors for having allegedly blocked a deal to acquire the San Francisco Giants. Huizenga denies pulling strings but admits the Marlins would lose as much as $8 million in TV deals and sponsorships if another team came into the state. “He is a hardball player,” says one businessman involved.
Huizenga will also have to play hardball to fight off other competition. The video field is getting crowded with big rivals like Tower Video and Tower Records. Moreover, with his fistful of private ventures-including a helicopter-courier service-and an endless stretch of 14-hour days, Huizenga has caused some financial-community observers to worry that he’s overextended. Still, the onetime waste man seems comfortably at home in his new industry. In fact, he’s eager to emulate his flamboyant partner, Virgin owner Richard Branson. When the pair’s first megastore opened in Los Angeles last month, publicity plans called for Branson to stampede cattle down Sunset Boulevard. The police nixed the plan, but Huizenga thinks it was the right idea: in this business, you’d better think big if you want to separate yourself from the herd.
Wayne Huizenga hopes to tie together his video, music and sports empire. Here’s one scenario:
1. Rent videos, get a free simulator ride
2. Buy simulator rides, get a free baseball ticket
3. Buy baseball tickets, get a free video rental