Blockbuster's Fired Up Mr. Fixit
When it comes to doing his homework, John F. Antioco is something of a fanatic. Take his job interview for the top post at Blockbuster Entertainment Group last spring. Viacom Chairman Sumner M. Redstone had blocked out one hour for lunch at the Beverly Hills Hotel. But Redstone was quickly charmed by the former fast-food executive, who sounded as if he had been in the video-rental business for years. The lunch went on for hours. "He surprised me," recalls Redstone, who was quickly convinced that Antioco was "the guy who will turn Blockbuster around."
Redstone needs his faith in the 48-year-old executive to pay off--and fast. The video-rental giant is Viacom Inc.'s albatross. Over the past two years, Blockbuster has been rocked by management turmoil, strategic missteps, a slowdown in the rental business, and a troubled adoption of a new distribution system. The combination has taken its toll. Analyst David J. Londoner of Schroder & Co. estimates that when Viacom reports fiscal 1997 financials in mid-February, before overhead charges, Blockbuster Video will show a 33% decline in cash flow, to $514 million, vs. $766 million the previous year. Viacom's total cash flow will drop 9.5%, to $1.9 billion.
"When Blockbuster is fixed, Viacom will fly again," insists Redstone. And Antioco, as the third CEO in less than two years, has been doing some crucial repair work since he signed on last July. Antioco declined to be interviewed, but Redstone says the crux of the comeback plan is a back-to-basics focus on the core operations of the $3.2 billion video-rental business, with tighter inventory and cost controls. Antioco is also overseeing a new marketing plan, including a new ad campaign vowing that customers will "Go Home Happy."
"NOT ON MY WATCH." Antioco spent the first months crisscrossing the country, meeting with store employees, regional managers, and franchise operators. He's also schmoozing with Hollywood studio executives, trying to smooth out relations and hammer out deals that may allow Blockbuster to buy tapes more economically. Antioco, who lives in Scottsdale, Ariz., and commutes to Dallas every few days, keeps a low profile. He's not granting media interviews, nor has he met with analysts to articulate his strategy.
Already, though, the Brooklyn native is pumping some energy into a demoralized staff, employees say. At a meeting of 1,100 Blockbuster store managers in Dallas last fall, Antioco delivered a fiery speech, portraying Blockbuster as an underdog that would prove skeptics wrong by coming back stronger and more aggressive than ever. "Will this company fail?" a fired-up Antioco asked the managers. "Not on my watch. No way, nohow."
Current and former associates describe him as a charismatic, no-nonsense manager. "It's all about customer service with John," says Karl Eller, who preceded Antioco as CEO of the Circle K Corp. convenience chain. "Figure out what the customer wants and find a way to get it to him." Antioco also gets high marks for motivating employees. When Antioco was CEO at Circle K, he and a colleague closed a national sales meeting with their best Blues Brothers impression, down to the dark suits, glasses, and hats. "That kind of stuff struck a chord with employees," recalls Ann Vry, formerly Circle K's public-relations chief.
Energy and drive have always characterized Antioco, who as a boy would rise at 3 a.m. to help his father, a milkman. Antioco later did stints as a shoe salesman, gravedigger, and stock clerk.
Antioco took his first assignment in retailing with Dallas-based Southland Corp.'s 7-Eleven Stores chain. By age 30, he was one of the company's youngest division managers ever. That's where Antioco began showing a talent for troubleshooting. The New York-based unit was bleeding cash, so Antioco spruced up stores, created new marketing campaigns, and patched up rocky franchisee relationships. Within two years, Antioco's unit was the company's most profitable.
PRAGMATIC. His biggest feat, however, came at Circle K. In his first two years as CEO of the troubled chain, he restructured debt and closed 2,000 stores. By 1993, Antioco and other top execs joined Bahrain-based Investcorp International Inc. in a $400 million buyout, taking Circle K out of Chapter 11.
With fresh capital, Antioco zeroed in on operations. He ditched parallel shelves and narrow aisles in favor of self-contained departments like "Beverage Depot." He scrapped the sky-high prices then typical of such stores. Recalls Mitchel E. Telson, then Circle K chief operating officer: "John reestablished the concept of what a convenience store was supposed to be."
Then, during his brief stint as CEO of Taco Bell Corp., owned at the time by PepsiCo Inc., Antioco presided over the chain's first same-store sales gain in more than two years. "John's a very smart, pragmatic guy who's very focused on the consumer," says PepsiCo CEO Roger A. Enrico. "Even in just a few months you could see his imprint on Taco Bell."
Can Antioco work his magic on Blockbuster? The new chief is keeping the focus tight on operations and customer satisfaction. He hopes new deals with Hollywood studios will give it access to more hit films at a lower price. In the past, many customers left Blockbuster stores empty-handed when hit releases were missing from the shelves. Antioco is also lowering prices and extending rental periods for new and older flicks.
Meantime, he has been cutting costs: He laid off about 180 employees, mostly at Dallas headquarters. Antioco also put the brakes on store expansions until later this year and shuttered all 17 stores in Germany, which were doing poorly.
There are early signs of improvement. Analysts estimate fourth-quarter, same-store sales of video rentals were up 2% from the year-earlier quarter, the first positive showing in more than a year. Still, even if Antioco works miracles, some investors question whether the unit, now in a slow-growth industry, will ever be a good fit for Viacom. Says Mario J. Gabelli, a large Viacom shareholder, with nearly 10%: "It was a mistake [for Viacom] to make the acquisition [in 1994], and it's [still] a mistake. The growth potential just isn't there."
But Redstone seems ready to declare a turnaround. "We don't need any more time to conclude that John is the right guy in the right job," he says. But of course, Redstone was just as publicly bullish on Antioco's short-lived predecessors. Viacom had hoped to spin off at least part of Blockbuster this year. Those plans are on hold--at least until Antioco delivers. Now, all Redstone has to do is hold on to him.