EX-99.1 2 dex991.htm BLOCKBUSTER INC. PRESENTATION, DATED JUNE 28,2007 Blockbuster Inc. Presentation, dated June 28,2007
BLOCKBUSTER
Lenders’
Conference Call Presentation
June 28, 2007
Exhibit 99.1


PAGE 2
BLOCKBUSTER
Forward-Looking Statements
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)
overall
industry
performance
and
the
accuracy
of
our
estimates
and
judgments
regarding
trends
impacting
the
home
video
industry,
(2)
consumer appeal of our online subscription offering, combined in-store and online consumer offering, including BLOCKBUSTER Total Access, and
other
existing
and
planned
product
and
service
offerings,
(3)
our
ability
to
respond
to
changing
consumer
preferences,
including
with
respect
to
video
on demand, digital distribution and other new technologies and alternative methods of content delivery, and to effectively adjust our offerings as
necessary, (4) the impact of in-store and online competitor pricing and product and service offerings, (5) our ability to obtain favorable terms from
suppliers, including on matters such as copy depth and uses of product, (6) 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,
(7)
variability
in
consumer
appeal
of
movie
titles
and
games
software
released
for
rental
and
sale,
(8)
our
ability
to
comply
with
operating
and
financial
restrictions
and
covenants
in
our
debt
agreements
and
any
adverse
publicity
relating
thereto,
as
well
as
difficulties
and
delays
associated
with
our
efforts
to
obtain,
or
our
inability
to
consummate,
in
whole
or
in
part,
the
amendment
to
our
credit
agreement
which
we
are
currently
seeking,
(9)
the
extent
and
timing
of
our
investments
to develop and implement our initiatives and our ability to effectively control overall operating expenses and capital expenditures, (10) our ability to
effectively and timely prioritize and implement our initiatives and our related ability to timely implement and maintain the necessary information
technology systems and infrastructure to support our initiatives, (11) our ability to capitalize on anticipated industry consolidation, (12) the application
and impact of future accounting policies or interpretations of existing accounting policies, (13) developments affecting our outstanding and any future
litigation and claims against us, (14) a change in the composition of our key management personnel and any shift in strategy in connection therewith,
and
(15)
other
factors
described
in
our
filings
with
the
SEC,
including
those
discussed
under
the
heading
“Risk
Factors”
in
our
Form
10-K
for
the
year
ended
December
31,
2006
and
under
the
heading
“Disclosure
Regarding
Forward-Looking
Information”
in
our
Form
10-Q
for
the
quarter
ended
April
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.


PAGE 3
BLOCKBUSTER
Agenda
Blockbuster Management Participants
Robert Bowman, Director
John Antioco, Chairman and CEO
Larry Zine, Chief Financial Officer
Mary Bell, Senior Vice President, Finance & Accounting, and Corporate Treasurer
Blockbuster Update
Business Update
Status of BLOCKBUSTER Total Access


BLOCKBUSTER
Blockbuster Business Update
John Antioco, Chairman and CEO
*
*
*
*
*
*
*
*
*
*
*
*


PAGE 5
BLOCKBUSTER
Blockbuster Key Highlights
Large Entertainment
Industry
Leading Position in
Home Entertainment
World Recognized Brand
Positioned For Growth
Through Investment
Significant Cash Flow
The Company operates in a $35B entertainment industry
Movie rental is an important source of revenues for the studios
The Company is a market share leader with approximately 40%
market share in the rental market
Large store base with significant traffic and highest average
revenue per store in the U.S. rental industry
The Company has a presence in 22 countries across the globe
Ability
to
leverage
the
BLOCKBUSTER
®
brand
in
the
online
space
Grew
online
business
to
3
million
total
subscribers
in
less
than
3
years
Provides completely convenient access to movies, in-store and
online today, digital tomorrow
Exclusive content deal with The Weinstein Company
Significant cash flow generation supports investment in
BLOCKBUSTER Total Access
Proven record of debt reduction


PAGE 6
BLOCKBUSTER
Proven Record of Debt Reduction
Revolver Paydown
Amortization Payments
Asset Disposition
2005
2006
2007 YTD
$135.0M
$20.5M
$145.5M
$55.5M
$145.0M¹
$155.5M
$201.0M
Despite significant industry challenges and ongoing investment in online, we
have paid down in excess of $500 million in debt over the past 2
years
Sale of
GAMESTATION,
®
RHINO VIDEO
GAMES
®
and Taiwan
Cash Flow
from the
business
1
Includes $75M in proceeds from the convertible preferred offering
Cash Flow
from the
business
Proceeds from the convertible preferred offering


PAGE 7
BLOCKBUSTER
Launched online rental service
Eliminated late fees
Surpassed offerings of store-based rental competition
Leveled playing field with online rental, VOD/PPV
Launched BLOCKBUSTER Total Access
Links stores and online
No one else offers immediate accessibility from stores and
convenience/selection of online
Announced the expansion of Blu-Ray to 1,700 stores
Launched BLOCKBUSTER By Mail
Modify BLOCKBUSTER Total Access for expected profitability in
2008
Continue to grow online subscribers and integration of
stores, online and digital delivery
As Market Innovators, We Have Invested Heavily …
Future
August 2004
June 2007
June-Dec 2007
January 2005
November 2006


PAGE 8
BLOCKBUSTER
…And Have Been Delivering On Our Mission And Strategy….
Blockbuster will deliver on that mission by:
Giving customers control and flexibility as to how they access movies
Stores
Mail
Digital delivery (how and when TBD)
Developing strong consumer propositions at a great value
“No Late Fees”
BLOCKBUSTER Total Access
Exclusive content
Providing Completely Convenient Access to Movies
Providing Completely Convenient Access to Movies
You Will Love
You Will Love


PAGE 9
BLOCKBUSTER
Five consecutive quarters of
positive domestic movie rental
revenue comps
Consistently outperformed in-
store competition
Nearly doubled online subscriber
base in 5 months to exceed 3
million total subscribers
Expect to have over 4 million
online subscribers by the end of
the year
…While Improving Operating Economics…
Paid down in excess of $500
million in debt since November
2005 while aggressively
investing in online
Used proceeds from asset
sales for further debt reductions
Focus on
Core Assets
Strengthen
Balance Sheet
Grow Overall
Market Share
Accelerated closure of
underperforming and marginal
stores in the U.S.
Sold GAMESTATION, RHINO
VIDEO GAMES, MOVIE
TRADING
COMPANY
®
and
Movie Brands Inc.
Exited Spain
Signed a 20-year licensing deal in
Brazil
Re-franchised Taiwan and
announced Australia
Continue to explore divestiture of
other non-core assets and
remaining international
operations


PAGE 10
BLOCKBUSTER
In 2006, we closed approximately 290 domestic BLOCKBUSTER
stores located in
close proximity to another BLOCKBUSTER store
We have transferred 25% of the revenue from closed stores to surrounding stores at
a high margin
In 2007, we expect to close approximately 282 domestic BLOCKBUSTER stores and
believe we will have similar benefits to 2006 closures
…Optimizing Our Store Base…
Total Net Revenue
EBITDA
$530,000
($30,000)
Avg. Store Closed
in 2006
32
121
85
23
11
18
0
25
50
75
100
125
0-1 Mile
1-2 Miles
2-3 Miles
3-4 Miles
4-5 Miles
> 5Miles
Distance to Another BLOCKBUSTER Store


PAGE 11
BLOCKBUSTER
Consolidation of independents is expected to further drive market share growth
With superior consumer propositions, such as “No Late Fees”
and BLOCKBUSTER Total
Access, we are stopping the defection of our customers to our online competitor and are
poised to grow our in-store and online market share
…And At The Same Time Expanding Our Market Share.
Domestic Rental Market Share
1997
Domestic Rental Market Share
2006
Data
Source:
Blockbuster
estimates
and
competitors’
public
filings
Domestic Rental Market Share
2004
BBI launched
online service
41.1%
57.3%
36.5%
6.1%
BBI
BBI Online
Other
NFLX
13.9%
38%
3.1%
45.0%
30.3%
69.6%


PAGE 12
BLOCKBUSTER
2007 YTD Business Update
Early results from BLOCKBUSTER Total Access are positive and online subscribers have
grown dramatically
Subscriber growth doubled in the past 5 months to reach 3 million total subscribers at the end of
Q1 2007
More store traffic and transactions
Operating metrics continue to improve
We have invested significantly in BLOCKBUSTER Total Access during the first half of
2007 to capture market share in the overall video rental market
and to set the stage for the
expected future profitability of our online rental business
This increased investment in BLOCKBUSTER Total Access coupled with continued
softness in the in-store rental industry second quarter to date, will affect profitability for the
first half of 2007
Before year-end, we intend to make modifications to our BLOCKBUSTER Total Access
offering that we believe will balance continued subscriber growth and enhanced profitability
We believe that investment in BLOCKBUSTER Total Access today creates compelling
subscriber monetization opportunities in 2008 and beyond


PAGE 13
BLOCKBUSTER
Domestic Rental Industry
Domestic Rental Industry Revenues¹
2004-2007; Billions
1
Adams Media Research
Significant growth in the online rental market has helped to offset the softness in
the in-store industry
$8.9
$8.5
$8.4
$8.4
8.4
7.6
7.1
6.5
0.5
0.9
1.3
1.9
4.0
5.0
6.0
7.0
8.0
9.0
2004
2005
2006
2007E
In-store
Online


PAGE 14
BLOCKBUSTER
Domestic In-store Rental Industry Was Soft In The First Half Of 2007
Domestic In-store Rental Industry YOY Revenue Expectations
1
2007 YTD; Percent
18.9%
8.6%
15.7%
15.9%
Domestic Home Video Release Revenues
2
2006 vs
2007E
2006
2007
Q1
2006
2007E
Q2
2006
2007E
2006
2007E
Q3
Q4
1
Blockbuster estimates
2
www.boxofficemojo.com
and Blockbuster estimates
Expected
Actual
-7.5%
-13.1%
We believe a more favorable release slate in the second half of the year will
create momentum for the rental industry


PAGE 15
BLOCKBUSTER
Future
Online
Market
Growth
-
Customers
Want
Integration
BLOCKBUSTER Total Access appeals to the biggest growth segment
within the rental market and is the only proposition that combines both –
in-store and online rental.
Growth Over the Next 5-10M Customers
Percent
Both
Store Only
Online Only
Source: Blockbuster-commissioned research
17%
23%
60%


PAGE 16
BLOCKBUSTER
620
1,320
1,260
20%
62%
50%
-
200
400
600
800
1,000
1,200
1,400
Q3 -
2006
Q4 -
2006
Q1 -
2007
0%
10%
20%
30%
40%
50%
60%
70%
Industry Net Adds (M's)
Blockbuster Percentage of Net Adds
BLOCKBUSTER
Total
Access
-
A
Catalyst
For
Subscriber
Growth…
Data Source: Blockbuster and Netflix public filings
Nov 2006 Launched
BLOCKBUSTER Total Access


PAGE 17
BLOCKBUSTER
…Improvement In Rental Revenues And Store Traffic…
Growing revenues from BLOCKBUSTER Total Access have helped offset the in-store revenue decline. 
Additionally….
…Average store traffic is trending up since the launch of
BLOCKBUSTER Total Access…
Which has translated into increased store rental
transactions.
Data Source: Blockbuster
$600
$700
$800
Q3 06
Q4 06
Q1 07
In-store
Online
35,000
40,000
45,000
Q3 06
Q4 06
Q1 07
Domestic Rental Revenues
$ Million
Domestic Average Traffic Per Store
Quarterly, Thousands
4,000
4,300
4,600
4,900
Q3 06
Q4 06
Q1 07
Domestic Average Rental Transactions Per Store
Quarterly, Thousands


PAGE 18
BLOCKBUSTER
-15.0%
-11.0%
-7.0%
-3.0%
1.0%
5.0%
Q1 06
Q2 06
Q3 06
Q4 06
Q1 07
…And Outperformance Of The In-Store Competition.
Data
Source:
Blockbuster
and
competitors’
public
flings
Launched
BLOCKBUSTER Total Access
-13.7%
-4.7%
Domestic Same-Store Rental Revenues
3.2%


PAGE 19
BLOCKBUSTER
The Time For Aggressive Growth Of BLOCKBUSTER Total Access Is Now
Data
Source:
Average
of
Kagan
-
State
of
Home
Video
2006
and
Adams
Media
Research
-
Hollywood
Aftermarket,
2/28/07
Net Annual Online Subscribers
Millions
2006-2010
CAGR 15.4%
8.6
11.4
13.4
14.5
15.3
5
7
9
11
13
15
2006
2007E
2008E
2009E
2010E


PAGE 20
BLOCKBUSTER
Aggressive Growth Positions Blockbuster For 2008 And Beyond
$170M
Initial
Investment
Launch
Marketing
Note: For illustrative purposes only
More online subs
and
BLOCKBUSTER
Total Access
program
modifications
Profitability
+
+
=
We have invested significantly in BLOCKBUSTER Total Access during the first half of 2007 to:
Capture market share in the overall video rental market, and
Set the stage for the expected future profitability of our online rental business
Before year-end, we intend to make modifications to our BLOCKBUSTER Total Access offering
that we believe will strike an appropriate balance between continued subscriber growth and
enhanced profitability
The improvement in profitability does not include additional upside from subscriber monetization
opportunities
2007
2008


PAGE 21
BLOCKBUSTER
Our Goals For 2007
Acquire between 50%-70% of the total 2007 online
subscriber growth
Exceed 4 million online subscribers
Continued market share growth of
overall rental market
Further reduce debt levels with proceeds from
additional asset sales
To walk into 2008 firmly positioned for
growth in revenues and profitability