RSSBlockbuster's way down, but poised for a comeback
By Tim Conneally | Published November 13, 2009, 7:22 PM
Yesterday, U.S. movie rental chain Blockbuster Inc. reported a third quarter net loss of $116.8 million, some $96 million worse than last year. Overall sales were $910.5 million, down from the $1.15 billion it made in the same quarter last year.
Numbers notwithstanding, Blockbuster may be in a better position now than it was earlier this year.
In the spring, Blockbuster looked like it was about to go extinct and end the video store era. While the company was busy dealing with diminished profits as the home video rental market transitioned to streaming video, by-mail rentals, and DVD rental kiosks; it had the additional terror of a huge debt coming due at a time when lending was absolutely frozen.
But in yesterday's earnings call, Blockbuster CEO Jim Keyes gladly said those debts have been taken care of with a $675 million senior secured notes offering, and that it's time for Blockbuster to concentrate on bouncing back against competitors Netflix and Redbox.
"There's really only one threat to Blockbuster and that is if we don't adapt," Keyes said in yesterday's conference. "I am really pleased to report that...our transformation is now continuing. In spite of our change in operating focus for the first three quarters, we did not lose sight of the strategic direction of the company and we have continued on the path toward transforming the company into a multi-channel offering by increasing our points of presence through Blockbuster Express vending kiosks and Blockbuster on-demand digital streaming."
As the economy worsened, Blockbuster's vast amount of retail real estate, (which comprised around 40% of the company's total value) began to look like a big impediment. While the company closed a large number of its stores this year (216 closed last quarter, 115 are expected to close this quarter) Keyes says the Blockbuster store will remain an essential part of the company moving forward.
"As we gain traction in digital streaming, the primary question remains what will become of the stores?" Keyes asked. "Well, the answer is simple -- our stores represent... a compelling competitive advantage. First, with fewer stores available today in the video store industry, there are just simply fewer places to find the breadth and depth of physical DVD offerings. The Blockbuster store is an important part of the entertainment lifestyle of mainstream America. In addition, we remain an important partner of the studios as we offer them a lucrative revenue stream on the majority of their product that never finds its way to the theater."
Indeed, Hollywood studios are divided in their support for $1 kiosk-based and streaming rentals, with some studios delaying their titles from rental circulation until they've been for sale for 30 days. Others have not yet committed to a release schedule yet.
Keyes explains this further. "There are a handful of studios either testing digital day-and-date releases at a higher price point than traditional rental or contemplating a retail window or going day-in date on video on demand. If the studios go day-and-date on video on demand, it provides a significant boost to Blockbuster on demand. If the studios put a retail window in, it would accelerate the popularity of retail movies available in our stores. If the studios put in a vending window, there is certainly an obvious advantage to our stores and we can provide the vending channel with previously viewed product at a lower cost of goods. So the key here is that given our multi-channel approach, we have the flexibility to adapt, the ability to be supportive of the studios and their current and also in the studio's future decisions surrounding viewing windows."
The bottom line is that Blockbuster can capitalize on the studios' desire to squeeze the most profit out of a movie's release.
Between netflix unlimited streaming and still getting one dvd at a time by mail, all for 9 dollars a month I think blockbuster is dead. As soon as the rest of the U.S. catches on to streaming, with roku, ps3, xbox 360, tivo and home theatre pc's. It's widely accessible now, 3 devices in my home theatre support it now, I have a hard time choosing which one to use. The variety is always expanding, its pretty crazy. Ps3 is the best so far. Fear the netflix.
I haven't rented a movie from Blockbsuter in at least a year and a half. The store down the street even closed. RIP Blockbuster, your grave is dug and ready for burial right next to comp usa and Circuit city. When's the funeral, I predict June 2010 or 2011.
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|You mean the rest of the US that has broadband?
There are still too many areas of the US that has to rely on dialup which hurts the user and looses money for companies like Netflix.
Netflix may be riding high now but if the USPS drops Saturday deliveries Netflix may see a huge drop in those planes higher then 1 at a time and need to make more of their catalog available for streaming which IMO they should have done by now anyway.
I am sure they could come up with a reasonable price for streaming only no DVDs.
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|I find it funny that there's a netflix ad on this page....(at least for me)
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|they are getting what they deserved. They put all the mom and pop stores out of business. I miss the porn section in the video store!
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|Blockbuster had its day. It's time to lay down and die.
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|If Blockbuster wants to be able to give a hard blow to Netflix then they need to launch their online game rental service ASAP! They announced that it would be here by the end of the year in about may and it has been quiet ever since. The end of the year is getting close!
If they can get this right it will be a huge success. The only true competitor they would have in this market is Gamefly. They have many more shipping centers than Gamefly, which would force Gamefly to either get more shipping centers or lower their prices. Either way it would be a win win situation for the consumer.
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|I hope blockbuster being down is due to the fact that people have started to catch on to the fact that blockbuster charges more for new releases than other movies & are classified AS new releases for a whole year so they can fleece there customers. What the hell is "new" after a year?
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|I dont know anyone who goes to blockbuster anymore
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|Netflix won the rental business, they already have thier streaming software in millions of consoles and BD players, now TV's with it built in. I cant see how Blockbuster could possibly make a comeback. Almost every Blockbuster store near me is closed. What is left?
There are already $1 RedBox rental kiosks inside every grocery store and outside every Walgreens. I just dont get it.
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|I've been saying for years that BB needs digital kiosks for people to load movies straight onto Flash drives, video iPods and the like. Streaming is great and all, but it requires a whole infrastructure of net-connected devices in your home to take advantage of it - not to mention broadband, which a huge swath of America still doesn't have. Imagine if you could go the video store, preview movies on a nice kiosk system, load em' on your flash drive, and have nothing to return later. BB stores could have a single server with all the popular releases and gazillions of pre-HD titles ready to go on demand. A single fat pipe could keep them updated. It would save a ton on handling charges and eventually shelf space as people transitioned to flash from DVDs.
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|The problem is DRM and who buys the "fat pipes".
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|I think the internet online movies streaming is taking the lead from blockbuster. Almost everyone is addicted to internet, watching movies online. That is the trend in 21st century and will last for long...
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