Blockbuster’s Growth Slows Video Chain Looks Overseas For Fertile Markets To Keep 10-Year-Old Growth Spurt From Stalling

The Blockbuster Video store in a Dallas strip mall is starting to show signs of its age. The shelves are dirty and the carpet is soiled.

But Blockbuster Entertainment Corp. would be hard-pressed to find a better testament to its growth into the nation’s biggest video retail chain than that relatively dreary store. The now 10-year-old outlet was the first of 4,300 video stores H. Wayne Huizenga opened as he built Blockbuster into one of the country’s most sought-after media empires.

The Fort Lauderdale-based company boomed during the past decade, but with the video industry changing and Blockbuster itself undergoing a metamorphosis after its sale last year to Viacom Inc., it will be hard-pressed to continue its spectacular growth rate over the next 10 years.

The video rental market is fast becoming saturated and facing the possibility that pay-per-view movies and other forms of video-on-demand will one day replace a trip to Blockbuster.

Spending on video rentals, which increased $5 billion over 10 years to $8.1 billion this year, is only projected to increase another $1.3 billion in the next five years, according to the Video Software Dealers Association.

Like many other companies facing slower growth, Blockbuster is looking overseas to expand. It hopes to nearly triple its 1,400 international video stores by the year 2000.

“That’s the real point of growth,” said John Tinker, a Viacom analyst for Furman Selz & Co. in New York. “There are more video machines in the international market but the rentals are lower. It’s far less saturated and there aren’t any chains. It’s the natural place to go.”

The company has found ways to branch out through the merger with Viacom. The deal has given Blockbuster a new range of merchandise including electronic games and products tied to Viacom’s MTV and Nickelodeon networks.

Blockbuster is also learning to grow without Huizenga. Rather than be No. 2 behind Viacom chief Sumner M. Redstone, Huizenga stepped down from Blockbuster to concentrate on his own company, Huizenga Holdings, and his three South Florida professional sports teams: the Miami Heat, the Florida Marlins and the Florida Panthers. He remains a Viacom vice chairman.

Observers say Blockbuster appears safe, at least for the time being. Lawrence E. Ullman, editor of The Stereophile Guide to Home Theater, a home entertainment magazine, said he’s not worried about video-on-demand posing a threat to Blockbuster.

“Video-on-demand already exists,” he said. “It’s called Blockbuster.”

Blockbuster’s revenues tell the story of its growth. During the seven years Blockbuster has been publicly traded, revenue has grown to $3 billion from $7 million.

Its competitors are among its admirers.

“They’re the McDonald’s of the video industry,” said Dan Sehres, owner of New Concept Video, a small, independent store on Miami Beach about three blocks from a Blockbuster. “They created the standard for video chains.”

VCRs are now found in 87 percent of American homes, compared with 18 percent in 1985, according to the Electronic Industries Association, an Arlington, Va.-based trade group.

“I think we’ve been a big contributor to that growth,” said Steven R. Berrard, president and chief executive of Blockbuster Entertainment Group. “Blockbuster Video has changed the way people spend their free time - not just their Saturday nights.”

Indeed, Blockbuster replaced the overnight video rental industry with the three-night standard rental found at most stores today.

In the process, it acquired small chains and opened franchise operations, providing stiff competition for the mom-and-pop video stores that offer foreign, cult and adult films.

Blockbuster chose to go with “a family approach to the tapes,” said Gerry Geddis, Blockbuster’s president of worldwide operations. No X-rated films, nothing adult.

“It was embraced very quickly,” he said.

Despite its success, Blockbuster doesn’t appeal to everyone.

Mark Boyle, a tractor seller, said he’d belonged to two Blockbusters in the past, but now drives 20 miles each way to an independent dealer because of the wider selection.

“There’s a video place near my house that’s 10 times as big as this but I swear to you there are not 10 movies I would watch,” he said.