Blockbuster to Buy Music Stores

THE JOURNAL RECORD, October 21, 1992 | Go to article overview

Blockbuster to Buy Music Stores


Burbank, Calif.-based Shamrock Holdings of California Inc. has announced plans to sell its Sound Warehouse and Music Plus music store chains to Blockbuster Entertainment Corp.

Fort Lauderdale, Fla.-based home video rental giant Blockbuster will pay Roy E. Disney's Shamrock investment company $185 million in cash and common stock for the 91-store, Los Angelessed Music Plus and for its Dallasbased, 145-store Sound Warehouse music chain.

Sound Warehouse has eight stores in the metropolitan Oklahoma City area and one Buttons store in Tulsa. Blockbuster Videos has 12 operating stores and four under construction in the Oklahoma City area.

The acquisition, expected to close in November, will mark the first expansion into music retailing by Blockbuster, the largest video retailer in the nation.

Sound Warehouse and Music Plus are among the largest specialty retailers of prerecorded music in the nation with 236 stores.

The company will acquire the equity and pay off the $120 million outstanding debt of the businesses with cash and some of the company's common stock, which together are worth $185 million, Blockbuster said.

As of Sept. 30, there were 2,989 stores in the Blockbuster system, of which 1,099 were franchisened and 1,890 were companyned.

Blockbuster officials said Monday that the stores of both chains will be revamped to become entertainment superstores, selling a broader variety of entertainment products to a wider age group of consumers than is currently the practice at either store chain.

"We are going to change the way music is retailed," said Gregory K. Fairbanks, Blockbuster's chief financial officer.

"We didn't make this acquisition to sit still in music. Our plan is to aggressively grow the music business through acquisitions or newore development," he said.

Blockbuster will immediately become a sizable presence in the record business. Ed Christman, retail editor for Billboard magazine, estimates that with the two chains, Blockbuster will become the seventhrgest music retailer, with about 4 percent of the $8 billion market.

Fairbanks said that besides music recordings and home videos, computer programs, compact discadlymory and a variety of other emerging entertainment technologies are products which may be sold at the stores.

He offered few specifics, however, stating that merchandising decisions remain under consideration.

Blockbuster acquired its dominance of the video market by expanding into neighborhoods and offering video selection that smaller competitors could not match. The chain has 15 percent market share, more than the next 300 competitors combined.

The Blockbuster chain, however, will encounter more competition in the music retailing business. The largest chain, Minneapolis, Minn.-based Musicland Group, has 815 stores.

Russ Solomon, chief executive of MTS Inc., the Sacramento, Calif.-based parent of Tower Records, said that the acquisition had been rumored for some time and expressed little concern at competing head to head with the video giant.

"They have a fine company, but we would have no trouble moving our stores next to any of their stores," Solomon said. …

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