Netflixed by Gina Keating

Author:Gina Keating
Language: eng, eng
Format: epub, azw3
Publisher: Penguin Group US
Published: 2012-09-19T16:00:00+00:00

CHAPTER NINE

THE BEST YEARS OF OUR LIVES

(2005–2006)

AFTER ANTIOCO DROPPED BLOCKBUSTER’S BID for Hollywood Video, a furious Icahn immediately took aim in the press. Antioco began to ignore his demanding phone calls: When the irate billionaire placed his customary closing-time call to Blockbuster headquarters, Antioco had his secretary routinely say that he had left for the day.

The tactic backfired when Icahn vowed to add Antioco to his wall of shame—by stripping him of his chairmanship, and possibly his job, in a proxy fight at Blockbuster’s May 11 annual meeting in Dallas. Antioco began to think he had made a mistake in not trying harder to placate Icahn, just to get rid of him. But it was too late; things had gone too far. A couple of weeks before the meeting, shareholder advisory services Glass Lewis and International Shareholder Services conditionally endorsed Icahn’s slate—consisting of himself and media executives Strauss Zelnick and Edward Bleier—over Antioco and two sitting directors whose terms had expired. The firms advised shareholders to put Zelnick and Bleier on the board, but if possible, withhold votes from Icahn, as his patent animosity toward Antioco and Blockbuster’s executive team would be detrimental to the company.

The tension came to a head on Blockbuster’s May 6 earnings conference call, when Icahn and Antioco got into a six-minute argument, as analysts and journalists listened in.

“Are you willing to agree that if these initiatives don’t work, and things don’t work out, that you would allow your whole board to be up for election next year, so that the shareholders would have the right to remove the board if they so wished?” Icahn asked.

“That’s not up to me to make that decision. The board will make that decision, so that’s the best answer I can give you,” Antioco shot back.

Finally, Antioco had the operator cut Icahn off in midsentence.

Antioco enlisted corporate communications chief Karen Raskopf to do damage control—to respond to the Glass Lewis and ISS recommendations against him and his directors. Blockbuster’s top management sought a compromise the night before the annual meeting, in negotiations that lasted until 2:00 A.M. and resumed at 8:00 A.M.—but it was too late.

In a stunning upset, Icahn and his two dissident directors captured 77 percent of the vote from Blockbuster’s shareholders at the May 11 meeting, with a coalition of Icahn and his hedge fund cohort tipping the balance. Blockbuster employees who attended the meeting in the Renaissance Tower auditorium emerged shocked, some in tears. Antioco, who had been stripped of his chairmanship, vowed to trigger his $54 million severance package over the material change in the terms of his employment.

“I’d be lying if I told you this is a happy day, because it is not,” Antioco said. “But we’ll roll with the punches.”

In response to Antioco’s threat, the Blockbuster board voted to create an eighth board seat to restore the chief executive to his chairmanship. Icahn also reiterated that he and his directors would not attempt to block the online and late fees strategies.

Blockbuster’s share price

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