ONE BLOCKBUSTER OF A MERGER COULD FIX MCDONALD'S WOES

Published on .

Last winter I played a round of golf with a guy who's the head of a major package-goods com-pany. Somewhere during the back nine I asked him what was wrong with McDonald's.

"They've forgotten their roots," he told me.

That's the conventional wisdom. Everyone says that instead of building the brand, McDonald's is lurching from one promotion to another. Everyone also says if the company would only get back to basics, sales and profits would regain their old sizzle.

I'd like to take a contrarian point of view. I say McDonald's doesn't want to get back to its roots-it's tired of the fast-food business, tired of trying to come up with new items to whet the appetites of fickle young consumers who don't appreciate its efforts.

How debilitating it must be for the McDonald's chefs when they hear customers are throwing away the food and keeping the Beanie Babies they got as promotional giveaways. "Somehow we have got to have people reconnect to the fact that we're in the business of selling food, not Happy Meals, not CDs, not plates," said one California franchisee.

But McDonald's is really good at selling all that other stuff, and it's not very good at making hamburgers that taste better than the ones at Wen-dy's and Burger King.

So what I think McDonald's should do is to turn its business entirely around, and make selling home videos, CDs and dolls and toys based on Disney mov-ies its main business and give away the food as a come-on.

And to help with this endeavor, McDonald's should buy a company with the same distribution advantage the restaurant chain enjoys but that currently has been having some problems selling the kind of stuff McDonald's knows how to move through the pipeline.

McDonald's should buy Blockbuster from Viacom.

Blockbuster has even more problems than McDonald's. For some reason, people aren't renting home videos as frequently as they used to. And Viacom has been forced to take a $300 million second-quarter writedown for continuing losses at Blockbuster, whose cash flow will plummet by as much as 70% this year.

Blockbuster, in short, has become the Snapple of the entertainment business. Its value has declined some $6 billion from when it was acquired in 1994.

A new chief, a former Wal-Mart executive, tried to make Blockbuster into a one-stop shopping center for all your entertainment needs. "One world, one word: Blockbuster" was supposed to signal that Blockbuster has it all. "There's a word, or haven't you heard? The future looks bright today. The world's within reach right down the street, so why don't you come out and play?"

I guess people didn't want to play, because the ex-Wal-Mart guy left within six months and the Viacom unit is resuming its former slogan, "Make it a Blockbuster night."

So here are two companies that have common problems-and maybe common solutions. Both Blockbuster and McDonald's are basically distributors of consumer products-it doesn't much matter what. McDonald's is trying to push mediocre food, and Blockbuster is stuck with a medium that will soon be obsolete.

I recommend that when McDonald's and Blockbuster merge, they jointly come out with a Whopper-killer they call the Blockbuster, and they offer this new burger for a very attractive price if you buy a home video or a CD.

One of the problems with the home video business (aside from people renting fewer videos) is that consumers are buying more and more videos from places such as convenience stores, discounters and gas stations. So selling Blockbuster burgers could help get people back into the Blockbuster stores.

What McDonald's and Blockbuster both need is a new game plan, which I humbly submit here. Whether the two chains get together or not, the danger is they will become retailers without a mission-just like what's happened to poor old

Most Popular