"3,000 stores. I believe that's the optimal number of Blockbuster chain stores in the United States. Blindly pursuing market share is very unwise, as it would only lead us to waste funds and energy on commercial areas with very low returns. By continuously optimizing the configuration of the planned 3,000 video rental chain stores, I hope Blockbuster can achieve a 50% domestic market share within the next three years".
The video industry in the United States has developed rapidly in recent years, with sales expected to exceed $10 billion this year, double the domestic box office.
If Blockbuster can achieve a 50% market share, it will become an industry giant with annual revenue reaching $5 billion and profits around $500 million. Its individual market value could easily exceed $10 billion.
Inside Loft Office No. 3 at Daenerys Studios.
Simon listened to Nancy and said, "If your goal can truly be achieved, perhaps I should buy out the remaining shares of Blockbuster now".
"I've calculated it", Nancy said, tracing figures on the table with her slender fingers. "Blockbuster's recent market value is around $3.2 billion. With the ongoing war in the Gulf, it might fall below $3 billion in the coming period. A full acquisition would allow us to control the bid between $4.5 billion and $5 billion, and we would actually need to pay about $3 billion in cash".
Simon observed Nancy's beautiful and delicate small hand, a smile playing on his lips. He said, "You know, I'm currently planning a very large acquisition".
Nancy felt Simon's gaze and rolled her eyes at him. Seeing that the man showed no sign of guilt and didn't avert his eyes, she simply picked up the coffee cup next to her, took a sip, and said, "The two things aren't in conflict, are they? Even if your own funds are insufficient, wouldn't it be easy to borrow billions of dollars from the bank?"
The debt crisis that erupted at the end of last year caused major North American banks to tighten credit, making it significantly more difficult for many companies to obtain loans. However, high-quality borrowers like Simon became the most sought-after targets for these banks.
Even if Simon wanted to raise $10 billion now, the difficulty wouldn't be too great.
"That's true", Simon said. "It's just that, besides Universal, I'm also considering some other things, equally expensive and large-scale plans, and their return on investment is higher than Blockbuster's. So, this matter will have to take a backseat".
Involving billions of dollars in acquisition funds, Nancy didn't expect Simon to agree immediately. Hearing that Simon had other plans, she asked curiously, "What are they?"
Simon shook his head: "I can't tell you".
Nancy said, displeased, "Boss, do you think I'm not trustworthy?"
"Of course you are", Simon affirmed. "However, trust also needs to be maintained. The most crucial point is, if unnecessary, don't easily give others reasons that might break that trust".
Nancy seemed to understand: "Alright, I won't ask".
"So, let's talk about overseas", Simon continued. "I've noticed that Blockbuster's overseas expansion seems a bit slow. Video rental chains are different from movie theatres; they face very few government regulations and trade barriers in overseas markets. Since we plan to grow big, overseas expansion should also be a very important aspect".
Compared to Blockbuster's domestic operations, which are expected to exceed 2,000 chain stores this year, overseas, only small-scale layouts have been completed in countries surrounding the US and in the five European countries of UK, France, Germany, Italy, and Spain. Moreover, except for Canada, which is developing at the same pace as North America, the total number of chain stores in other markets is less than 200, primarily concentrated in core cities like London, Paris, and Berlin.
"Those overseas chain stores are temporarily just for market exploration. Early market research and data analysis are very important. Once these are completed, as long as funds are sufficient, the speed of overseas expansion will be no less than in North America. Additionally, I recently plan to connect all Blockbuster stores in the Boston-Washington metropolitan area on the East Coast to the internet, and also redesign Blockbuster's membership system. In short, there's a lot to do, and we can't devote too much energy to overseas markets for now".
"As long as you have a plan," Simon nodded, then cautioned, "Also, don't try to do everything yourself. Let Wayne Huizenga and James Frey handle what they should".
Although it was a very important equity-held company under Daenerys Entertainment, Simon was very confident in Blockbuster due to the presence of Nancy Brill, Wayne Huizenga, and others. Aside from some major financial and personnel changes, he now basically did not interfere with Blockbuster's specific operations.
"I understand".
Nancy said, and remembering something, she beckoned her assistant who was waiting nearby, gave a few instructions, and turned to Simon to explain, "Speaking of Blockbuster's membership system, could you take a look and see if there's anything that needs improvement? Also, the 'Dune' video game has started internal testing; I'll get you a copy".
Seeing the petite woman about to brazenly exploit her boss again, Simon said, "I make hundreds of thousands a minute; surely you don't need to bother me with such things?"
The real-time strategy game genre was a very important category from the single-player game era of the 90s to the online game era of the new millennium. Many years later, phenomenal online games like 'World of Warcraft' and 'League of Legends' all had intricate connections to real-time strategy games.
Therefore, Simon had actually been following the production of 'Dune', as it related to many future plans.
He had no interest in discussing Blockbuster's membership system.
There were so many people at Blockbuster; they couldn't be kept for nothing.
Nancy didn't understand the "hundreds of thousands a minute" quip and said, "I'm just asking you to see if you have any good ideas; we'll handle the details ourselves, of course. I've noticed you always come up with novel ideas that break the limits of ordinary thinking. This talent is simply enviable".
"Is that a compliment? But why don't I feel good about it?"
Nancy said, "The DC movie universe, just that one plan, do you know how amazing it is? As long as the two films next year are successful, this strategy might be added to the case studies at Harvard Business School".
Simon laughed, "Well, it seems I really am amazing".
Nancy rolled her eyes at Simon again.
The assistant quickly brought a folder and a copy of the 'Dune' floppy disk.
Simon set the game floppy disk aside and opened the file. Nancy, across from him, said, "We are temporarily planning to divide members into two tiers: junior members and senior members. We will primarily offer member discounts, extended video return periods, reduced late fees, and some monthly or annual subscription ideas".
Instructing Nancy's assistant to bring him another bottle of water, Simon lowered his head and began to review the membership plan in front of him.
Nancy didn't waste time either, casually flipping through another document. Noticing her assistant brought over a bottle of mineral water, she casually struck up a conversation, saying, "Several times I've seen you only drink water. Why don't you drink coffee anymore?"
Simon, without looking up, said, "Janette and I are planning to have a child, and coffee isn't good".
Nancy was puzzled: "Does coffee affect the baby?"
"A very serious impact, so you need to be careful in the future too".
"I'm not planning to get married".
"Not getting married doesn't mean you can't have children".
"Having children is a lot of trouble. If I needed to, I'd plan to adopt one".
"It's better to have your own child".
Nancy thought of something and said, displeased, "Male chauvinist."
Simon was puzzled: "Do these two things have a causal relationship?"
"Yes!"
"Alright, I'm a male chauvinist".
Both fell silent. After a while, Simon said, "These plans all look very good to me. As for their specific effects, I think Blockbuster could try them out in chain stores in one or two states, similar to your overseas pilot program. If feasible, promote it nationwide; if not, cancel it, and it won't affect the big picture. Actually, the advantage of a sufficiently large company is precisely this: a strong tolerance for error. Not just with the membership system, but any good idea can be tried out in selected areas."
Nancy tilted her head, thought for a moment, and immediately picked up her memo pad to jot it down.
Simon laughed, "No need to be so formal, didn't you think of it?"
"I thought of the first half of what you said, but not the second half", Nancy said, quickly writing a few sentences before looking up and asking, "Anything else?"
"Regarding value-added services for members", Simon said, "Have you personally gone to a Blockbuster store to rent a video?"
Nancy said, "Of course, every week".
"Don't you find it troublesome?"
"Troublesome?"
"Have you never thought about home delivery?"
Nancy pondered for a moment and said, "The cost is too high. Selecting films, remote reservations, and logistics are all major problems".
"In the short term, we can use phone reservations. As for logistics, try cooperating with the postal system. The federal postal system is very developed, and they probably wouldn't mind an extra source of income. Sign a bundled contract with the local postal system to cover all annual orders, and then Blockbuster can break free from the constraints of chain stores, needing only a few large warehousing and logistics centres in each city."
Nancy's small face showed an undisguised expression of surprise. She said, "This is simply a revolution. If we really do it, our existing chain store system will collapse".
Simon shrugged and said, "If I can think of it, others should be able to come up with similar ideas. Blockbuster disrupts itself, or is disrupted by others, which result do you choose?"
Nancy frowned and pondered for a moment, then said, "Such a service involves too many complex links and requires development to a sufficient scale to achieve economies of scale. Smaller video rental companies cannot offer such a business. For us, it also doesn't seem necessary to do so. Blockbuster's chain store distribution is carefully selected and continuously optimized to maximize user convenience. They can often stop by a store on their way home from work to pick out a video, without needing remote mail delivery. By the way, you just said 'in the short term', does that mean you also have long-term ideas?"
Simon sensed the negativity in Nancy's tone and was not surprised.
A business model similar to Netflix and Lovefilm would indeed be difficult to implement in this era where only phone reservations are currently available. Moreover, even in the internet age, Blockbuster would instinctively resist such a business model due to its desire to maintain its own chain store system.
"Long term, if internet users grow to a sufficient scale, Blockbuster can establish its own online website. Users can search and reserve videos through the website themselves, much like a library's electronic book retrieval system. This would solve the problems of film selection and remote reservations, and it would be more secure and convenient. Users would receive videos through the postal system, and after watching them, they would only need to put the videos into special Blockbuster packages and mail them back, without ever leaving home".
"If I remember correctly, the number of America Online users this month should only reach 150,000. How many years do you think it will take to reach a sufficient user scale?"
"The proportion of American households owning VCRs grew from 2% to 70% in just ten years. I believe the internet will reach that level of penetration in ten years at most".
"The idea of developing business through the internet is very good, but even if your prediction comes true, it will still take at least five more years. A 2% VCR penetration rate in households wouldn't develop a Blockbuster." Nancy said, then suddenly changed the subject, staring at Simon without blinking and asking, "Boss, I'm very curious, where do all these forward-thinking ideas of yours come from?"
This wasn't the first time Simon had encountered such a question. Janet's scrutinizing glances at him in the past were truly devastating, so he calmly said, "This idea just now was told to me by a guy named Reed".
"Reed?"
"Yes," Simon nodded, raising his chin towards the empty seat next to Nancy, and adopting a strangely eerie tone, "He's sitting right next to you".
Nancy turned to look at the empty space beside her and said with displeasure, "Hey, Reed, would you mind sitting across from me? I hate men".
The petite woman seriously played along with Simon's dry humour. Neither of them laughed, but it left Jennifer Raybould and Sherry Lansing, who happened to walk over together, utterly bewildered, even feeling a bit unnerved.
What was going on here?
Seeing Jennifer and Lansing, Nancy stuck out her tongue, and after greeting the two women, explained, "It's just a joke". She then stood up, pointed to the 'Dune' game floppy disk next to Simon, and said, "I'm going to get busy. For this, remember to send me an email after you've tried it out".
After Nancy left, Jennifer said to Simon, who had stood up, "Ms. Lansing has been waiting for you for a while, so I brought her over here".
Simon checked his watch.
He was scheduled to meet with Sherry Lansing at 2:30 PM to discuss the collaboration between Daenerys and MGM. The meeting at Marvel had just ended, and it was still a bit early. He wasn't in a hurry to return to the executive district, but he hadn't realized it was already 3 o'clock while chatting with Nancy.
Apologizing, Simon simply sat down there and asked Lansing, "Have you read the script for 'A Few Good Men'?"
These days, Johnston Holdings in Australia had begun taking over Channel Seven under the Qintex Group, and the collaboration between Daenerys Entertainment and MGM was also progressing.
In Simon's view, the most crucial problem facing MGM was to avoid being bought and sold repeatedly as it was in the 1980s. As long as it was given a stable development environment, it would not be difficult to recover in the context of Hollywood's global expansion in the 1990s.
At worst, with a few years of patient operation, the company could be resold by the Australian side at a very good price.
As for the two planned co-production films, Simon was not satisfied with several projects proposed by MGM. In the end, he simply took out a newly acquired copyright from Daenerys: 'A Few Good Men'.