Antioco to exit Blockbuster
UPDATE: CEO set to leave role at end of year
By Samantha Clark and Cindy Spielvogel -- Video Business, 3/20/2007
MARCH 20 | Blockbuster CEO John Antioco will leave the No. 1 rental chain by the end of year, after a decade-long tenure in which he struck landmark revenue-sharing deals with the studios, eliminated late fees and played a key role in establishing DVD rental as a subscription business.
Ending two years of tumult between Antioco and investor Carl Icahn, who is Blockbuster’s largest shareholder, and a dispute over Antioco’s 2006 bonus, the parties agreed to an amended and restated agreement that will pay Antioco a $3 million bonus for 2006 and an additional $5 million when he leaves the company.
That’s less than half of the $7.65 million Antioco argued he was entitled to for 2006 and the $13.5 million he would have been entitled to if he had been terminated without cause or resigned on Dec. 31, under the agreement prior to the amendment.
“John and the company have reached terms that are clearly in the best interests of the stockholders,” said Icahn, a member of the board of directors. “I and the rest of the board remain committed to working with our dedicated management team to deliver on the company’s financial goals for the year and to continue positioning Blockbuster for improved success now and into the future.”
Antioco at odds
Icahn and Antioco began at odds over Blockbuster’s handling of a failed merger with Hollywood Entertainment in 2005, and Icahn consistently questioned Antioco’s pay.
Antioco lost his seat on the board in 2005 after being challenged by Icahn and two Icahn-backed nominees, but he was re-elected chairman of the company’s board at the annual shareholder meeting in May.
In a statement about the new employment agreement, Antioco said, “This revised employment agreement allows for management continuity and ample opportunity for an orderly succession by the end of the year. In the meantime, the board of directors, our management team and I remain focused on continuing to improve the business, most notably through Blockbuster Total Access.”
Blockbuster’s shares dipped on the news. The company’s stock price, trading around $25 in 2002, was at less than $4 in August and rose to above $7 this month.
Battle over control
Despite the pay disputes, in the end, the fight between Antioco and the board was really not about money but about who would steer the company, speculated analyst Michael Pachter of Wedbush Morgan Securities. “To me, that was crystal clear when the bonus was withheld,” he said. “Icahn is not seeing the progress he had hoped for in free cash flow,” Pachter said.
Pachter believes Icahn would like to see Blockbuster’s stock rise sooner rather than later, while Antioco probably was charting a course designed to have the stock rise to an even higher level in the longer term.
Yet Pachter doesn’t think Antioco’s exit will be a bad thing for the stock, at least in the near term.
“Icahn has no interest in making the stock go down,” Pachter said. “He just has a shorter investment horizon than most.”
Neither Antioco nor Icahn was available for comment beyond their prepared statements, so it’s not known for certain why Antioco agreed to a relatively small exit package.
Blockbuster senior VP of corporate communications Karen Raskopf said Antioco chose to stay to carry out the business plan he started, such as investing further in Total Access in the first half of the year to take the online/in-store rental service over the 3 million subscribers expected by the end of the first quarter.
Wayne Huizenga 1987-1994 Steven Berrard 1994-1996 Bill Fields 1996-1997 John Antioco 1997-2007
The garbage company baron acquired the young Blockbuster chain during the high-growth years of video rental and turned the retailer into a formidable corporate powerhouse before selling it to Viacom.
Huizenga protégé served briefly at the helm of the retailer in combination with other Viacom units, including Showtime Networks.
Former Wal-Mart executive instituted direct distribution with the studios and pushed hard into sell-through.
Antioco’s tenure at Blockbuster:
1997• Antioco joins as chairman and CEO. 1998
• “Go Home Happy” copy-depth campaign made possible through landmark revenue-sharing deals. 2000
• Partners with Enron for a VOD service. Deal ends a year later after failure to secure movie rights. 2001
• Adds Radio Shack boutiques in stores; pulls plug on the trial a year later. 2004
• New contract through 2009 for Antioco: options tied to stock performance. • Online subscription rental service takes on Netflix. • Eliminates late fees. 2005
• Ends hostile bid to acquire Hollywood Entertainment. • Icahn takes over board; retains Antioco as CEO, partly to avoid paying severance. 2006
• Antioco is reelected chairman. • Total Access online/in-store rentals roll out; tallies 2 million subs by year-end. 2007
• In talks to acquire Movielink. • Antioco to leave at year end.
