MONDAY, OCTOBER 11, 2010
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EZ RE WASHINGTON BUSINESS THISWEEK, OCT. 11-15
Things are relatively quiet on the economic data front, but itwill be a big week for the Federal Re- serve.
Monday In her first speech as the No. 2
Fed official, Janet L. Yellen, who was sworn in as vice chairman last week, will address the National Association for Business Economics.Her topic is “Macroprudential Supervision andMonetary Policy in the Post- CrisisWorld.” Nomatter what she says about that broad topic, people in financialmarkets will be scrutinizing her words for any evidence of the direction of Fed policy. The central bank will be weighing whether, and how, to undertake new steps to try to boost the economy at its Nov. 2-3 policymeeting. Yellen’s words will carrymore weight than when she was president of the Federal Reserve Bank of San Francisco.
Tuesday The Fed releasesminutes of its
RON HEFLIN/ASSOCIATED PRESS
Fewer people are making it a Blockbuster night thanks toNetflix, Redbox and other ways to watch movies, which is bad news for the troubled video-rental chain. But the onetime titan is trying to make a comeback in the wake of its bankrupcy filing, which will allow it to reorganize.
Blockbuster ponders a sequel
MORE STORES MAY BE CLOSED
Netflix, Redbox loom as strong competitors
BY DANIELLE DOUGLAS
Capital Business Staff Writer Once a fixture of the American
retail landscape, Blockbuster has been upstaged and undone by the rise of online and kiosk movie services. In the wake of its recent bankruptcy filing, the vid- eo powerhouse has left its fans and store landlords asking the same question:What next? There are roughly 30 Block-
busters in the Washington area, many of which serve as anchors in neighborhood retail centers. For now, Blockbuster said it will keep the doors open to all 3,000 of its U.S. sites while attempting
to reorganize its finances. That might not be for long.
The company said it is evaluating the portfolio “with a view to- wards enhancing the overall profitability of operations,” ac- cording to the company’s spokes- woman, Patty Sullivan. There is little doubt that to
enhance profitability, Blockbust- er will shutter a wealth of its stores. Months before filing for bankruptcy protection, about 145 of its sites went dark, includ- ing several in the Washington area. Blockbuster is now trying to
cancel the unexpired leases on those stores, which it projects will save the company $19 mil- lion over the remaining terms of the contracts. A continuation of this strategy to any degree will place pressure on local retail vacancy rates. On average, Blockbusters in
this region range in size from 5,000 to 6,000 square feet, ac- cording to Thomas H.Maddux, a principal at KLNB Retail, who represented the company in
deals throughout Washington and Baltimore. What’s left of Blockbuster’s local portfolio, he said, are store located in general- ly desirable areas. Maddux said it is probable
that nearly any location Block- buster gives up will get snapped up, much like Circuit City’s for- mer sites. “When Circuit City and Linens
’n Things closed, the best real estate got picked off pretty quick- ly. And Blockbuster has good real estate,” he said. Not too long ago, neighbor-
hood retail owners clamored to have the video powerhouse an- chor their centers. “Theywere highly sought after
because they generated a lot of traffic,” saidMaddux,who recalls a time when there were upwards of 200 Blockbusters in the met- ropolitan area. At its peak in 2004, Blockbuster counted 9,094 stores worldwide and recorded $5.9 billion in revenue, accord- ing to data fromSNL Financial. Around that time, Netflix was making its presence felt, amass-
ingmore than 2million subscrib- ers to its online movie rental service. Blockbuster soon launched a DVD-by-mail service, but it could never catch up to Netflix. Meanwhile, Blockbuster is
still trying to supplant Redbox Automated Retail’s kiosk busi- ness. The company hopes to have 7,500 kiosks in operation by the end of this year; Redbox runs nearly 30,000 stands. Analysts say Blockbuster was
too slow to respond to new technology, which ultimately hurt its profits. Revenue was down 16.4 percent, to $1.7 billion, in the first half of this year. Some observers speculate that Block- buster could emerge from its reorganization with few, if any, bricks-and-mortar locations. “Blockbuster is a victim of a
changing industry,” Maddux said. “When the automobile was invented, buggy manufacturers were challenged. Same thing here.”
douglasd@washpost.com
last policy meeting, on Sept. 21, where it said the policymaking committee “is prepared to pro- vide additional accommodation if needed to support the econom- ic recovery.” That was a strong signal that new monetary action could be at the offing as soon as the November meeting, and the minutes should reveal the tenor of the discussion in September, and possibly a sense ofwhat form newmeasuresmay take.
Friday Yet another big day for the Fed,
Neil’s Must Reads
Columnist Martin Wolf discusses the possibility of a currency war with China in the Financial Times. And Daniel Drezner at Foreign Policy and Megan McArdle at The Atlantic dissect the seemingly never-ending punditry of American decline.
Find links at
washingtonpost.com/ mustreads. For economic links, news and more, follow Neil Irwin on Twitter at Neil_Irwin.
as Chairman Ben S. Bernanke is scheduled to speak at a Boston Fed conference on “Monetary Policy Objectives and Tools in a Low-Inflation Environment.” Other Fed officials have been speaking recently about the cen- tral bank’s intentions, and this speech could be Bernanke’s last, best chance to set expectations and make his own views clear in advance of the big meeting Nov. 2-3. Also Friday, the CommerceDe-
partment is scheduled to report on September retail sales, which analysts expect to show an 0. 4 percent gain. And the Labor Department
plans to report on the Consumer Price Index for September, which is projected to have risen 0.2 percent, or 0.1 percent excluding food and energy.
—Neil Irwin
A13
NEWAT THE TOP KELLEYDUNNEONEECONOMY
Expanding access in a wireless world Kelley Dunne
I wanted to first do something to serve others. I joined the Army, where I was involved in rolling out some of the first digital wireless communication systems. My experience in the Army
A An entrepreneur and author offers his tips for success I
was lunching the other day with a chattyWashington investor who dabbles in local
startups, when he suggested I list business lessons in a Value Added column. His timing was perfect. BillMurphy Jr., 39, a former
Washington Post reporter and aspiring entrepreneur, has a book coming out Tuesday called “The Intelligent Entrepreneur: How ThreeHarvard Business School Graduates Learned the 10 Rules of Successful Entrepreneurship.” Murphy was bugging me over
the past fewweeks to write about his book, and I was interested mostly because: a) I have been interested in journalists who have strong entrepreneurial streaks and b) his book included aWashington company I have been dying to write about. The company is called Bluemercury, a chain of 27 cosmetic stores founded by HBS gradMarlaMalcolm Beck of Bethesda. Murphy picked Beck and two
other entrepreneurs for his book (which paid a healthy six-figure advance) because he wanted to teach himself about how to start a business. I have never metMurphy, and
didn’t know him when he worked for The Post and for assistant managing editor Bob Woodward between 2005 to 2007. Murphy has quite a background. After earning a law degree from theUniversity of Connecticut, he worked as an attorney for theU.S. Army in Washington and upstateNew York.He has written screenplays, none of which have been made into a film.He was paid a mid- six-figure advance for “In a Time ofWar,” a book that chronicled the lives of threeWest Point graduates who fought in Iraq. What I found interesting
aboutMurphy, who lives in the Washington area with his wife, a school principal, is that he is an entrepreneur himself. The first venture was a profitable campus newspaper at theUniversity of
VALUE ADDED Thomas Heath
Connecticut lawschool in Hartford that he ran for two years, and then passed on to succeeding students. The second was a magazine he
ran from 1997 to 1998 called JD: The LawStudent’s Survival Guide.He cobbled it together with a couple thousand dollars, free office space from aHartford area business group and free graphics help from a nearby college. “We were scrappy as hell,”
Murphy said. They called their venture theMercury American Publishing Co. to make themselves sound big.He and his business partner drove a rented Ryder truck from Boston to Washington, sneaking into law school buildings and slipping copies into student mailboxes and campus newspapers. WithMurphy writing under
various pen names, the magazine published only three issues.Most of the advertising came from two companies that offered competing bar exam test prep courses.Murphy took his small profit and decamped toHawaii, where he stayed with his brother to decompress. The magazine taught him an
important business lesson: “Think about the problem you are solving before you come up with the solution.” “We misidentified our
customers,” he said. “We should have designed the magazine to appeal not just to lawstudents, but toMBAs and graduates from top schools.” Why? “We should have known our
customers were theMcKinsey& Cos., theGoldman Sachses, the big consulting firms and big law firms who wanted to recruit
smart, ambitious young people. That’s a much larger market than the bar reviewcompanies that were our bread and butter.” Murphy is nothing if not intrepid. Like most entrepreneurs, he networks like mad. Desperate to get journalism jobs, he would hang out at the National Press Club bar, trolling for contacts.He paid $350 at a silent auction for the right to have lunch withUSA Today editors, where he asked them to hire him. (They didn’t.) He went to work for
Woodward in 2005, and after a short stint in Iraq for The Post, he left to write books. The idea for the Intelligent Entrepreneur came from his brief immersion in small business.HeGoogled phrases such as “earned herMBA at Harvard” and “graduated from Harvard Business School,” which led him to interviewmore than 150 people. “I asked them to tell me who
were the success stories and the most interesting people they had graduated with,”Murphy said. That led him to a dozen people, which he narrowed down to three, including Beck. To sift through the group, he
established two thresholds: the first was that the company must have more than $50 million in revenue, or the entrepreneurs had to have made $20 million if they sold the firm. The second threshold was that
the company had to have created something. It could not be just an idea. “They had to have created
something of real value,”Murphy said. “It had to be something real.”
Beck was a perfect candidate.
She built a multi-million-dollar business from nothing. “It was a real product because you could walk in the stores and see the products. It wasn’t financial Jujitsu. And she knewher customers, what they needed, and focused like a laser on meeting those needs.” Here’sMurphy’s advice to entrepreneurs:
1. Be committed to entrepreneurship, the act of creating something, rather than a single idea. Beck threwout several ideas, including certified e-mail, before she settled on cosmetics stores. 2. Solve a problem. While at
Harvard, Beck had to drive all over Boston to find various cosmetics.How about a company where they were all in one location? 3. Think big. Thing new.
Think again. In other words, scale up. Beck went after an industry used by half the population and hopes to have hundreds of stores some day. 4. You can’t do it alone.Have a
support team of people you know and trust. Beck worked so well with her co-founder that she married him. 5. You must do it alone. Be decisive. Beck killed an idea to sign long-term leases on some stores, which turned out to be the right thing after the market crash. 6.Manage risk. It’s true about
everything in life. Like many entrepreneurs I have written about, Beck is fanatical about maintaining a cash reserve. She also paced herself, not going for the “get big fast and flip it for a fewmillion bucks” mentality. That’s why she has 27 stores now and her early competitors are gone. 7. Lead. Reminds me ofUnder
Armour founder Kevin Plank: “You need to put your hands around the throat of your business, and you need to run it.” Beck gets behind the cash register to ring up sales and for years insisted on interviewing every newemployee. 8. Learn to sell. Bluemercury
at its core relies on sales. Likemy wife, Polly, told me once: if you can sell, you will always have a job. 9. Persistence is everything. 10. Time, not money, is the key resource.Have a life outside of work, and find time to give back.
heatht@washpost.com
Follow me on Twitter at addedvalueth.
became the foundation of all the success I enjoyed inmy career. Being a lieutenant in the Army taughtme accountability, leadership and teamwork. I eventually joined a very
small company that was delivering DSL technology to apartment communities across the country.We grew rapidly. I brought vision, leadership and execution and the ability to build a scalable business. In 2000, when we sold it to
Verizon, it became Verizon Avenue. I began to see that as the
world evolvedmore into a wireless one, we could create different businessmodels to serve areas that were harder to reach. I came up with a plan to do
this and pitched it to Verizon. We began to take new technologies and apply themto a lot of underserved areas of the country such as Native American reservations, rural communities and inner-city low- income housing. I had a woman in Idaho tell
me that her options for employment went fromone job to hundreds because of her ability to work fromhome after receiving broadband. It was a very powerfulmoment to know you had a small part to play in changing the economic opportunities of one household. I decided to startmy own
company, DigitalBridge.We deployed new technologies in more than 14markets in the past four years.We worked in cooperation with other partners in the industry to help figure out how to serve different parts of the country. I’ve always been an admirer
of One Economy. I love their approach to themarket. I love the way they ran it like a business, created very collaborative public-private partnerships and focused on the holistic solution — not just access but content training and sustainability. Here was an opportunity to
COURTESY OF ONE ECONOMY
Position: Chief executive of One Economy, a D.C.-based global nonprofit that delivers technology and information to low-income people.
Career highlights: Co-founder, chairman and chief executive, DigitalBridge Communications; executive vice president of operations, Verizon Avenue; vice president, One Point Communications.
Age: 45.
Education: BS, communications systems management, Ohio University; MS, information and communications sciences, Ball State University.
Personal: Lives in Leesburg with his wife and three daughters.
s I startedmy career, I decided that if I was going to participate in society,
bring wireless to underserved communities on a bigger scale with a very well-respected organization that has a long track record and is poised to do some fantastic things both domestically and globally. I want to leveragemy
experience to bridge the digital divide. I have this fundamental philosophy of saying, “but for the grace of God, there go I.” Just because I’mfortunate enough to live in a place that does have broadband, I’mvery focused on areas that don’t. — Interview with VanessaMizell
On Mondays, TheWashington Post offers Capital Business, a weekly publication covering the region’s business community. A one-year subscription costs $49 and is available only to Post subscribers.
Visitwashingtonpost.com/capitalbusiness for more details.
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