|December 4, 2008|
|Blockbuster's Desperate Specials Show Its Retail Days Will Soon Be Over|
|By Kevin McCauley|
|Blockbuster CEO Jim Keyes today signaled the end of the bricks & mortar part of the video company when he tossed a bombshell on the Reuters Media Summit in New York. |
The Dallas-based chain is unveiling a 99-cent retail offering on “thousands of its titles” beginning in January. Those items are targeted at the “value-conscious consumer in this challenging economy.” Things are not going to look so pretty when those value hunters come up empty or wade through the greatest collection of cinematic junk in the desperate bid to find a keeper.
The reality: Blockbuster’s business model has been toast for some time during this age of the Internet. When was the last time you walked into a Blockbuster store and actually found the non-current flick that you were looking for? This blogger certainly hasn’t. Over the past month, I went to two separate Blockbusters twice and struck out both times. The first was to rent “The Shining” in order to show my 17-year daughter what a real scary movie is. The next was to pick up “Good Night and Good Luck,” which is hardly an art house title. No luck, again.
I wasn’t alone. Others went home empty-handed.
Blockbuster has undergone an extensive remodeling program to freshen up its stores. The 99-cent strategy sure has a down-market feel to it. Keyes also announced today that Blockbuster plans to renegotiate leases on at least one-third of its stories. To me, that is another acknowledgment that the end is near.
Keyes does get an “A” for effort because he is not playing with a very strong hand. Blockbuster lost $17.8M during the third-quarter on $1.2B revenues. The company put a nice spin on that dreary performance. It PR people stressed the red ink was 48.3 percent less than last year’s pile of $34.4M. Wall Street isn’t buying that spin. Blockbuster shares are trading at $1.17. It's fair to assume the value of a Blockbuster share won't be enough to rent a movie come January. Those shares did trade for 72 cents each during the past 52 weeks. The high was $4.19.
Keyes did catch a break earlier this year when the bonehead offer to buy Circuit City fell apart. Blockbuster on April 14 offered to pay $6 a-share for the electronics chain subject to due diligence. It noted the “combination of the two companies would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices. The transaction would allow both companies to benefit from the revenue growth generated by their complementary products, while the resulting synergies would substantially improve consolidated financial performance, thereby increasing shareholder value."
Blockbuster pulled the offer July 1 after the “completion of our initial due diligence process.”
Circuit City declared bankruptcy last month. I hope Blockbuster doesn’t follow. I like the people who work at my local Blockbuster stores. It’s not their fault their company's time has come and gone.
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