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Surfer Dude Esq.

After ending an eight-year stint as general counsel for Apple Computer, Edward B. Stead was happy to ski and surf and travel around with his family. Then he started looking at telecommunications and entertainment. The latter won out. Stead is GC for Dallas-based Blockbuster Inc., the world's largest video rental chain.

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NAME: Edward B. Stead TITLE: Executive vice president, general counsel and secretary AGE: 54 ORGANIZATION: A publicly traded subsidiary of Viacom Inc., Dallas-based Blockbuster Inc. is the world’s largest video rental chain, with 7,700 stores in the Americas, Australia, Asia and Europe. Blockbuster, with 2000 earnings of $534.8 million on revenue of $4.96 billion, has 90,000 employees. FALLOUT FROM SEPT. 11: On Sept. 25, Blockbuster announced that it would begin placing signs near terrorist-themed movies and games to help consumers make informed rental decisions. Stead says he participated with the rest of the executive committee in deciding on how to implement the idea. Basically, there are two prongs: the in-store warning and a sharp reduction in the quantity of movies with terrorist content that Blockbuster orders from the studios, he said. The only movies affected are those that were released to theaters before Sept. 11 with upcoming video release dates. Stead named one: the John Travolta film “Swordfish.” The studios are withholding from theatrical release new movies with subject matter about terrorism. “We thought that in view of our customers’ sensitivities, we’ll put a sign on the shelf — what we call ‘shelf talkers’ — saying it contains a terrorist theme,” said Stead. “We’re also going to adjust our buying accordingly. We’ve reduced our order; we’ll be getting a smaller quantity.” DEPARTMENT: Stead manages 19 lawyers who handle everything except litigation. When he joined Blockbuster in 1997, the company had just relocated its headquarters from Fort Lauderdale, Fla., to Dallas. Only one lawyer from that period remains in the department. Stead, with help from a legal recruiter, hired 18 lawyers from firms and companies in Dallas. Two operations lawyers are based in London and Melbourne, Australia; the rest of the department works out of Dallas. Most of Blockbuster’s legal work is transactional — licensing deals with studios, acquisitions of stores and alliances with other businesses. A group of real estate lawyers manages store transactions involving 1,000 new leases a year and another 1,000 renewals, and it farms out some of the work to local firms. In-house lawyers also handle all employment, trademark, marketing, corporate and studio-related work. HIS JOB: Stead, a member of Blockbuster’s four-person executive committee, has weekly meetings with his department in Dallas as well as with the movie studios in Los Angeles. He handles major transactions, manages litigation and makes top-level business strategy decisions. A typical day “is today,” he said: “I’m meeting with someone who’s trying to sell us a company, an antitrust expert, three different technology vendors, the department … and whatever free time [I have will be spent] meeting with John” — CEO John Antioco. On the litigation front, Stead manages everything, keeping close tabs on cases after he assigns them to outside counsel. BUSINESS INVOLVEMENT: Stead takes an active role in helping Antioco run the business. Both men arrived in 1997 when Blockbuster’s business model was aimed at profitability: a rental revenue-sharing plan that would give the movie studios an incentive to provide Blockbuster with enough copies of videocassettes to satisfy consumer demand. Stead devoted his first two years to forging the revenue-sharing agreements, which in turn boosted rentals and enabled him to achieve one of his key objectives: taking the company public. (Stead owns 525,000 options, valued at roughly $10.8 million). Since the initial public offering, he has forged alliances with other companies to use Blockbuster’s brand name to sell other products and services: DirecTV Inc. uses the Blockbuster name to sell its pay-per-view movies, and RadioShack Inc. sells electronic equipment in Blockbuster stores. As for video-on-demand, he’s keeping tabs on it, but says there’s no money in it yet. In addition, Stead is involved in a business venture with Dean Wilson, Blockbuster’s executive vice president for production, and Antioco. They formed Blockbuster-owned DEJ Productions Inc. (DEJ being the first initials of their first names). DEJ buys about 150 new, independent films a year that don’t get picked up by studios for theatrical release and puts them out on video. OUTSIDE COUNSEL: For litigation, Stead uses Rob Walters of Houston’s Vinson & Elkins and Ricardo Cedillo of San Antonio’s Davis, Cedillo & Mendoza. When his staff gets too busy to handle all the securities and antitrust matters, Stead uses New York’s Paul, Weiss, Rifkind, Wharton & Garrison and Shearman & Sterling. He also hires local real estate lawyers across the U.S. to handle store leases. LITIGATION: Blockbuster is named in some 75 pieces of litigation; it’s a defendant in about 50 of them. The cases involve antitrust, contract, real estate and employment law. Stead believes some cases should be settled because the cost of litigation outweighs settlement costs. In one recent example, Blockbuster moved in June to settle two dozen class actions filed by customers claiming that the chain charges exorbitant fees for late rental returns. The cases that could result in judgments that would adversely impact the company are antitrust suits by independent video retailers over Blockbuster’s revenue-sharing agreements with the movie studios; the plaintiffs contend that the pacts increased Blockbuster’s market share and drove competitors out of business. A federal judge in San Antonio in March rejected class action status for one of the suits, finding the store owners were a divergent lot with varying abilities to make their own deals with studios. The plaintiffs refiled the suit in federal court in Los Angeles, but that court also denied class certification, according to Stead. But the issue lives on. Blockbuster, Viacom and the movie studios have been sued in federal court in San Antonio by individual plaintiffs for allegedly attempting to monopolize the video rental market. A hearing on class certification is scheduled for later in October. ROUTE TO THE TOP: Stead, a native of Long Island, N.Y., earned his bachelor’s degree from St. Lawrence University in Canton, N.Y., and ran his own surf and ski shop on Long Island before going on to law school at St. John’s University, where he earned his J.D. in 1973. His first job was as an in-house lawyer at IBM Corp., where he stayed for 12 years. He then joined Boston’s Cullinet Software Inc., first as assistant general counsel, later becoming general counsel. He saw that company grow from a $4 billion company to a $12 billion operation. His next job was as general counsel for Apple Computer Inc., an eight-year stint that lasted until the fall of 1996. One of his major accomplishments at Apple was to move the legal work, except litigation and specialty work, in-house. He also saw Apple’s patents grow — from 20 to 1,500. Why did he leave Apple? “I was on my third CEO in three years,” said Stead. “I’d had enough. I’d been in the computer industry for 25 years.” At first he was happy to ski and surf and travel around with his family. Then he started looking at telecommunications and entertainment. The latter won out. At the time, Viacom’s stock was depressed, and Blockbuster had made several managerial missteps. Antioco, a former CEO at Taco Bell and Circle K, and Stead were of like mind about how to turn things around for Blockbuster. “I came with the objective of doing an IPO,” said Stead. “The big problem was perceived to be the stores, but it really was the studio relationships. We went to work on revenue-sharing deals with the studios before we did the IPO.” FAMILY: Stead’s wife, Henny Wright, is of counsel to Washington, D.C.’s Goldberg, Godles, Wiener & Wright, where she also is a name partner. Their daughter, Sierra, is 17 months old. Stead also has three children from an earlier marriage: Meredith, 19; James, 22; and Jonathan, 27. LAST BOOK READ: Jon Krakauer’s “Into Thin Air.”

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