John Antioco, the man synonymous with Blockbuster’s dominance in the vidtail arena, is ankling after a nasty compensation battle.
The departure, signaled in an SEC filing Tuesday, was treated as a non-event in the vid biz given longstanding tension between the topper and Carl Icahn, a major Blockbuster shareholder.
Wall Street was unimpressed, as shares slid 3.5% to $6.86 in heavy trading upon news the CEO would depart the chain by year’s end.
Under terms of his agreement, Antioco will receive a $3.05 million bonus for 2006 — a compromise between the $7.65 million Antioco believed he was due and the $2.28 million proposed by the board — plus a lump sum payment of $4.99 million upon departure instead of the $13.5 million for which he was eligible upon departure had the board not invoked a negative discretion clause.
The settlement is viewed as a victory by Icahn. The tussle was first disclosed in February, when the chain reported mixed fourth quarter and full-year results.
Although Antioco and Icahn painted the agreement as one that would allow for orderly transition, the exit comes at a tricky time for the chain. Once so powerful it could all but dictate terms to studios, the vidtailer is grappling with online competish and digital downloads, not to mention competish from sell-through heavyweights such as Wal-Mart. Although Antioco had taken his knocks lately, his departure nonetheless raises questions about the chain’s ability to navigate the future.
“You know what? Nobody’s crying for them,” said one homevid exec. “Yet they still represent a significant chunk of business so nobody wants them to go away.”
Rentals, which rep about a third of the vid biz’s $23.6 billion annual coin Stateside, have been showing promising signs of growth lately after having been virtually written off. Wall Street is far more interested in emerging technologies, such as high-def DVDs, online rentals or digital downloads, however.
Jeff Logsdon, an analyst with BMO Capital Markets, which does not own any Blockbuster shares, downgraded the stock to “market perform” from “outperform.”
Although Blockbuster has had recent success with its Total Access campaign, which emphasizes a “bricks and clicks” strategy, the analyst said Antioco embraced online too late, after ceding too much ground to Netflix and others.
“In the early years of the online rental business, there was little interest in investing there,” Logsdon said.
Netflix shares rose 5% on the day to $22.48.
Logsdon said Antioco’s departure raises three worrisome scenarios for investors: a potential sale, the exit of a CEO whose company’s shares doubled over the past six months and more turmoil in the video business, which is grappling with flattening DVD demand and new technologies.
Antioco’s 10-year stewardship spanned the emergence of revenue-sharing deals with the studios to the DVD explosion, thorny spinoff from former parent Viacom and its current guise as a Net hopeful.
When he was newly arrived from turnaround stints at Circle K and Taco Bell, the chain was reeling under an ill-fated overhaul by Bill Fields, a former Wal-Mart exec. Antioco quickly restored focus on video rentals and his turnaround earned high praise from Sumner Redstone with his resurrection of Blockbuster’s fortunes.
In 1998, Redstone vowed, “One way or another, we’ll be together forever.” The dialogue seemed straight out of Paramount’s then-smash “Titanic.”
The chain withstood an aggressive challenge by Hollywood Video and eventually tried to buy it two years ago. In its heyday, studios chafed at Blockbuster’s might. Today, however, Wal-Mart is the 800-pound gorilla for the vid biz.
But even execs who went head to head with Antioco admired his leadership.
“I have a great deal of respect for John, and he has shown enormous ingenuity in running Blockbuster,” said longtime Warner Home Video topper Warren Lieberfarb, now a consultant.
Lieberfarb credits Antioco with quickly embracing revenue-sharing shortly after he arrived at Blockbuster. “He was ingenious throughout his tenure at Blockbuster and in promoting it,” he said. “And I’m sure he will continue to have a great deal of success.”