While Blockbuster moved to acquire a majority stake in Discovery Zone, the Chicago-based operator of children's play centers, Discovery Zone last month purchased 90% of McDonald's stock in competitor Leaps & Bounds.
Big Mac's exit is not surprising.
"It goes right down to the culture of the company, where they are just very focused on their core business," said Alex Brown & Associates, Baltimore, analyst Steven Rockwell.
McDonald's original intent was to couple the playgrounds with its restaurants to attract even greater family traffic. Sales promotion agency Frankel & Co., Chicago, used radio, TV and outdoor advertising with the tagline "Leaps & Bounds ... the amazing place to play" in Midwestern markets.
But past experiments in family oriented side businesses also were scuttled. After a 2-year test, McDonald's and Sears Merchandise Group moved in 1991 to close 47 McKids children's apparel boutiques in Sears stores.
And although McDonald's has tested a number of different restaurant formats through the years-including double-drive-through units and a Golden Arches Cafe with table service-the efforts never blossomed.
"Burgers are our principal business and that is our area of focus," said a McDonald's spokesman. "But McDonald's will hold 10% of Discovery Zone's common stock. We will continue to have an interest in this business."
At the same time, Blockbuster loves having its fingers in another pie. "The demographics match up nicely with Blockbuster, and the cross-promotion potential is ideal," said Brian Woods, VP-national marketing.
George Johnson Jr., Blockbuster president-domestic consumer division, said the Leaps & Bounds buyout effectively "took out the competition."
Discovery Zone will operate 241 of its own centers-having purchased back 57 from Blockbuster for 4.5 million shares of common stock-and the 49 Leaps & Bounds centers.
For Blockbuster, the move consolidates competition in an industry heavily run by mom-and-pop outlets. It also gives Discovery Zone an essential tie-in with a ubiquitous Blockbuster marquee, said Todd Berko, Kidder Peabody, New York, research analyst who follows Discovery Zone.
"There is now going to be one major player," he said. "So when it comes time to come into a market and dominate it from a marketing perspective, they are going to be the players in town."
Together, the deals provide Blockbuster a key entry into a younger market, and a way to "grow the consumer" from indoor playgrounds to videos, games and music, said Mr. Woods. Some suggestions have included placing video rental locations or music outlets near the playgrounds to give parents something to do while the children romp, he said.
Similarly, Blockbuster's much-touted database marketing efforts, along with the company's newly released "universal" membership card, would gain a younger and wider audience.
Chuck Gelman, VP-marketing with Discovery Zone, would not speculate on the marketing potentials for the two companies, at least until the merger is complete.
D'Arcy Masius Benton & Bowles, St. Louis, has Blockbuster's $100 million corporate account, but a company spokesman said Discovery Zone's marketing would be directed by the Chicago office and involve current agency Griffin Bacal, New York, for the time being.