updated 02:10 pm EDT, Fri November 2, 2007
Blockbuster Near Death
The large video store chain Blockbuster may be on the verge of financial collapse, the company's latest quarterly results show. The company posted a net loss of $35 million during the summer and will be engaged in a defensive effort to protect its "core rental business," company chief Jim Keyes says. This involves both ramping down Blockbuster's promotions for its online Total Access rental service and emphasizing new developments in its brick-and-mortar stores. Jobs and duplicate resources will be cut both online and for retail shops, Blockbuster says.
The company has declined to speculate as to the reason for the downturn but may be trying to avoid competing directly with Internet-based video services that may be contributing to its demise, suggests writer Don Reisinger. Total Access has had to compete with the more successful Netflix rental service as well as with direct-download sites that bypass physical rentals entirely, such as Amazon's Unbox or the the Xbox Video Marketplace. The new retail-heavy strategy for Blockbuster is reportedly evidence that Blockbuster is attempting to ignore a logical shift in the market towards online business that other companies can do better.
"For Blockbuster, there is currently no prospect for growth," he says. "Not only is it incapable of breaking the Netflix shell, the brick-and-mortar stores are failing, and there is little chance it will be able to capitalize on the future of movie rentals -- downloading."
Blockbuster bought Movielink earlier this year to offer its own equivalent but has done little to tie the two companies together beyond the formal business link. Movielink is typically placed lower in rankings beneath both other download rental services and purchase-only services such as iTunes.