A Blockbuster Video Idea
'The market was shouting' for Movies & Games 4 Sale.
When Greg Pabich's 9-year-old daughter wanted to show a movie at her slumber party in 1982, she sent her doting dad scrambling. Pabich, a 7-Eleven division marketing manager, didn't own a VCR and had never before rented a video.
Coming up empty after visiting local specialty shops and grocery stores, all of which required reservations for VCR rentals, Pabich discovered that the tape he wanted was also hard to find. After offering his patronage to about 10 sold-out stores, Pabich finally located what he was looking for. But it cost him: $99 to join a video-rental club, and then $9.99 to rent a VCR and $4.99 for the tape. "The market was shouting at me," Pabich recalls. "If you are in the business of selling something, you make sure you never run out."
A few days later, he began an experimental program in his division to prove that video-rental stations would be successful. He then tried to sell his superiors at 7-Eleven on the idea of establishing a rack company that would provide turnkey video-rental stations to all the chain's stores. "They went for it almost immediately," Pabich recalls. "What really motivated them was the incremental sales of soda, popcorn, candy, and beer." The business, called V.D.O., thrived, eventually supplying more than 300 stores in Texas and New Mexico. But a "typo" in V.D.O.'s corporate bylaws left control of the company in the hands of Pabich's investors, who wrested it away from him in 1986. "They kicked me out," he says.
So Pabich went to work for the competition, Stars to Go Inc., which grew to become the nation's largest rack company. Business boomed until the industry's 900-pound Godzilla, Blockbuster Entertainment, lumbered onto the scene, in 1987. "We laughed that it was not a viable concept," Pabich recalls.
Soon he was out of work again. "The business was tailing off, and somebody had to go," he says.
Scanning the trades, Pabich noticed ads placed by people looking for used videos. So he called his former employer, offering to take excess inventory off its hands. It shipped him 8,000 used videos, without even agreeing on a price. With his family's help, Pabich cataloged the wares and circulated his inventory list.
One of the first people to get the list offered to buy him out. "I just picked a number, $11.25 each, and he said, 'Fine," Pabich recalls. He grossed $50,000 on the deal, effectively launching Movies & Games 4 Sale (#277). A video-rental superstore can spend about $600,000 purchasing an initial stock of 10,000 titles brand-new, or stitch together the same used inventory from Pabich for $150,000.
Pabich has also extended the used-is-better strategy to video games, which are sold in discount racks at major retailers like Wal-Mart. One of his biggest customers is none other than Blockbuster.