For a chain like Blockbuster, which primarily engaged in video tape rentals, one of the most expensive costs was the warehousing and logistics expenses associated with the videotapes themselves. A single videotape intended for rental might only cost about fifteen dollars to purchase, yet its warehousing, logistics, and related operational costs over its lifecycle could easily reach fifty to sixty dollars.
To accelerate the turnover of videotapes among customers as much as possible, thereby reducing the number of tapes that needed to be purchased and easing warehousing and logistics pressure, while also generating more revenue, Blockbuster had implemented a late fee system.
Customers typically had seven days to use a rented videotape. If they kept it beyond seven days, they would begin accruing daily late fees.
In the original timeline, one of the points Netflix repeatedly attacked Blockbuster over was this very late fee system that customers deeply resented. They even fabricated a story about the founder creating Netflix after being charged forty dollars in late fees for a copy of Apollo 13.
In reality, that story was entirely made up, and Blockbuster had nearly sued Netflix over it. For Netflix, however, the tactic worked extremely well.
Because late fees were indeed a weak spot for Blockbuster.
After investing in and taking control of Blockbuster, Simon had reminded Nancy Brill and the Blockbuster management to pay attention to the late fee issue.
However, in the early stages of Blockbuster's development, late fees had proven very effective, so the system had remained in place.
Yet as competition in the North American video rental industry grew increasingly fierce, Blockbuster's late fee system began to feel more and more outdated.
"Over the past few months, I conducted various experiments canceling late fees in three cities on both the East and West Coasts. The results showed that after removing late fees, customers rented videotapes at a noticeably higher frequency, and the revenue at the stores not only did not decrease, but actually increased."
While the Blockbuster executive continued introducing Blockbuster Online on stage, Nancy Brill spoke to Simon in a low voice below the stage about the matter.
Blockbuster's second-quarter financial report had not yet been released, but Simon knew that in the first quarter of 1992, out of Blockbuster's total revenue of seven hundred and thirty million dollars, sixty-one million dollars had come from late fees. That portion accounted for eight percent of total revenue.
In his memories, Blockbuster's late fee income had exceeded ten percent of total revenue. Such a 'handsome' sum was almost equal to the company's annual net profit. This was also why, right up until Blockbuster's bankruptcy in the original timeline, the video rental giant had never been able to completely eliminate the late fee system.
Even someone who knew nothing about running a company could probably understand that a business relying on fines to prop up its revenue was fundamentally unhealthy.
Blockbuster was naturally aware of this issue. However, the company in the original timeline had grown far too large and cumbersome, and it lacked a strong controlling shareholder. This ultimately caused hesitation on many strategies that needed changing. Not only did it fail to completely abandon the late fee system that actually had a strongly negative impact on the business, but when the industry trend shifted from physical rentals to online rentals, Blockbuster instead made a major reversal by completely cutting its already established online rental business. In the end, the world's largest video rental chain vanished into thin air.
Thinking of these things, Simon asked Nancy, "Have you discussed this with the Blockbuster board?"
Nancy nodded. "Many people have concerns. There's also the issue of franchise stores. Company-owned stores aren't much of a problem, but franchise stores are even less likely to want to give up late fees. We can't expect those franchisees to have too much long-term vision."
Of Blockbuster's more than 4,300 chain stores, approximately twenty percent were franchises.
This ratio was also much lower than that of Blockbuster in Simon's memories.
After fully taking control of Blockbuster, one of the important measures the management had implemented with Simon's support was gradually phasing out the franchise system and focusing solely on developing company-owned stores. This was also why Blockbuster's current store count was far lower than in the original timeline.
However, Blockbuster could not immediately revoke the franchise rights of stores that had already signed on.
Moreover, these franchise stores enjoyed much greater operational freedom than company-owned ones.
For example, if Blockbuster's headquarters decided to eliminate late fees, these franchise locations did not necessarily have to follow suit completely.
"If you can guarantee that your experimental data is solid, then go ahead and implement it," Simon considered for a moment before saying. "I'll back you up with the board and shareholders. You'll need to handle the franchise stores yourself. However, I suggest you don't try to do everything in one go. Carefully develop a reasonable plan."
Nancy nodded. "I plan to use this opportunity to further expand Blockbuster's membership system. Additionally, I want to differentiate Blockbuster's franchise stores from its company-owned stores, for example by adding a prominent 'Franchise' label on franchise locations to distinguish them. After all, this Blockbuster Online initiative will not involve franchise stores either."
The Blockbuster Online plan was meant to gradually integrate with Blockbuster's physical stores. If franchise stores were also pulled into the system, it would inevitably create problems with profit distribution.
"So if you do this, how will you handle the dissatisfaction from the franchise stores?"
"I plan to give them greater operational freedom while appropriately lowering franchise fees."
Simon smiled. "You'd rather just spin those stores off entirely, wouldn't you?"
A trace of helplessness appeared on Nancy's delicate, petite face. "Yes, but unfortunately it's too difficult."
Spinning off the franchise stores, like eliminating late fees, meant giving up a large chunk of market share and accounts receivable. This would seriously impact Blockbuster's stock price.
Throughout the entire press conference, the two continued whispering about Blockbuster eliminating late fees. Even during the reception after the event ended, Nancy stayed by Simon's side, continuously discussing various issues.
Nancy's 'persistent clinging' inevitably made Simon's female assistant, who had come with him, feel a certain instinctive wariness. Her desire to follow closely behind Simon while worrying about being disliked was so obvious that even Nancy noticed it.
Finally, Simon simply sent his female assistant off to chat with Claire and the other C-girls who had also come today, then turned to Nancy, who wore an amused expression. "Is it that fun for you?"
Nancy tilted her face up, the corners of her mouth carrying a mischievous, triumphant smile. "It's quite entertaining."
"Be careful or Jennifer will make things difficult for you later. You know, men have very soft ears. If she badmouths you a few times in front of me, you might lose your job."
Nancy asked, "Are you the kind of man who's easily influenced by women?"
Simon nodded very seriously. "Yes. The more beautiful the woman, the less I can resist."
Nancy was momentarily stumped, then rolled her eyes. "That's why I'm certain Jenny wouldn't do that."
"Why?"
"Since you know you're easily influenced by women, you definitely wouldn't keep someone around who likes to manipulate and control you."
Simon thought for a moment, lifted his glass, and took a sip of red wine. "That actually makes a lot of sense."
Nancy took another step closer, seemingly intent on pressing her advantage. "So, I guess you actually have quite a bit of wariness toward women?"
Simon looked down at the petite female executive before him, ignoring her latest theory, and said instead, "You've already stepped into my personal comfort zone when interacting with people."
"Do you feel uncomfortable?"
"No," Simon's tone turned dangerous as he said softly, "You've made me feel the urge to hunt."
Nancy met Simon's gaze. Less than a second later, she still took a small step back.
The female housekeeper happened to come over to greet them at that moment, breaking the slight awkwardness that had just begun to form.
"What are you two talking about?"
"Blockbuster's late fees."
As Simon spoke, his gaze openly appreciated Alice's crisp and elegant appearance in her white business suit.
After that night last time, although they had seen each other several times, the two had not found another opportunity to be intimate.
On one hand, Simon was actually quite restrained. On the other hand, with the few women around him, they basically managed to keep him in check. For example, when he came to San Francisco, his female assistant left him no chance to indulge. If Janet was in Los Angeles, Simon rarely stayed out all night.
As Simon's eyes fell on her, Alice inexplicably recalled the sensation of the man's large hands moving over her body with a hint of roughness that night. She suddenly felt a little uneasy and had to shift her attention to Nancy. "Speaking of which, Nancy, have you considered the matter I mentioned to you?"
Nancy's gaze shifted between Simon and Alice for a moment before she nodded. "I've thought about it. Although I also think it's feasible, if we actually do it, we could face a class action lawsuit from the shareholders."
Simon stood to the side. Hearing the two women speak like this, he asked, "Is there something I don't know about?"
Nancy glanced at Simon. "Alice wants Blockbuster Online to cancel its videotape sales business."
Simon immediately understood.
Amazon's online mall had developed rapidly over the past half year. Therefore, in addition to books, expanding into other product categories was a must. Besides books, videotapes were undoubtedly one of the most suitable types for online sales at this stage.
The female housekeeper probably hoped that Blockbuster Online would cancel its videotape sales business to avoid competing with the business Amazon planned to launch. Of course, there should also be corresponding benefits exchanged. Amazon wouldn't let Blockbuster drop this business for nothing.
Although Blockbuster's chain stores focused primarily on video rental, they had always been involved in videotape retail as well.
Simon looked at Nancy and asked, "What do you think?"
"I think it's a good suggestion," Nancy said honestly. "By canceling online retail, Blockbuster and Amazon can engage in mutual user referral promotions. Blockbuster would also be able to significantly reduce expenses related to its retail business. Actually, Simon, I've even considered canceling the retail operations at our physical chain stores to allow Blockbuster to focus more purely on rentals. It's just that doing so simply wouldn't work."
Late fees might only account for eight percent of Blockbuster's revenue, but videotape retail revenue made up more than twenty percent of total revenue. It was indeed impossible to cut.
As for Blockbuster Online, the website had just launched, and its online retail prospects were still uncertain. Canceling it seemed inconsequential.
However, if they really did so, Blockbuster's other shareholders would definitely be unhappy. Damaging the interests of Blockbuster's shareholders for the benefit of another company within the Westeros system would be hard to justify. Therefore, the other shareholders would very likely file a class action lawsuit.
When operating a company, especially a publicly listed one, it was often impossible to make the most correct decisions. This was exactly why.
Ultimately, it was because Simon had not been able to buy Blockbuster outright back then.
If he had achieved one hundred percent ownership, then the boss could do whatever he wanted.
Nancy soon added, "However, besides eliminating late fees, I've also been considering cutting some of Blockbuster's peripheral businesses, such as movie merchandise sales."
Simon smiled. "That line of business was something you yourself proposed back then."
"Yes," Nancy did not deny it. "But after recalculating the cost-to-return ratio for these businesses over the last few quarters, I think it's best to cut them and return to focusing on core video rental. This would save a large amount of human resources and make Blockbuster's management and further expansion much easier."
After speaking, Nancy gave Simon an interested look, her eyes even carrying a hint of 'why don't you beg me?' Blockbuster's merchandise retail primarily sold film and television merchandise related to Daenerys Entertainment.
Simon really wanted to pinch Nancy's delicate little face: Hey, do you still remember who your boss is?
Of course, he couldn't do something like that at a public reception with so many eyes watching.
Nancy seemed to realize something and instinctively shrank her neck a little. Then, refusing to back down, she looked back at him with a fearless expression that seemed to say 'go ahead and pinch me if you dare.'
Simon naturally wouldn't actually do something so abrupt. "As long as you believe the decision is appropriate, you can go ahead with it. However, Nancy, you will also have to bear the consequences of your decisions. Also, don't forget that you are still primarily the Group President in charge of consumer products at Daenerys Entertainment."
Nancy paused for a moment. The small thoughts she had just entertained were completely dispelled. She said seriously, "I will consider this matter very carefully."
The petite female executive suddenly understood as well.
Merchandise sales might not have a particularly high input-to-return ratio for Blockbuster and would increase labor, procurement, and logistics costs for the chain stores. However, it could substantially boost Daenerys Entertainment's merchandise revenue.
Blockbuster's profit margin on merchandise sales might be very low, but the returns Daenerys Entertainment received were extremely high.
Nancy had been focusing too much on Blockbuster in recent months and had inevitably neglected her primary responsibilities. In fact, when she had brought up the matter earlier, it was merely an immature idea that had occurred to her after analyzing Blockbuster's recent quarterly financial reports.
If she thought it through carefully, she definitely wouldn't have proposed it so rashly.
Women were always prone to taking out their frustrations elsewhere. Beneath her faint annoyance and embarrassment, Nancy felt certain that it was the man before her who had caused her to develop these somewhat confrontational little emotions.
Yes, it must be that.
She was clearly not at fault. [TL/N: Just like my girlfriend, she's always right.]
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[Adv. 30 chapters on my patreon.com/edgyreader]