Hit by withering effect of mail, digital

Rental chain Blockbuster Video will close between 810 and 960 stores by the end of 2010, an SEC filing reveals. While putting a significant number of people out of work, and closing off some markets, the move is expected to add another $50 to $60 million to annual earnings before expenses like taxes and interest. The company has over 7,000 stores worldwide at present, scattered across Asia, Europe, the US and Australia.

Substituting somewhat for the lost stores will be a kiosk expansion. The company has plans to move from 497 kiosks now to 2,500 by the end of 2009, and some 10,000 by the middle of 2010. Blockbuster's main competition in this area is Redbox, a division of Coinstar that likewise rents DVDs through unattended machines.

One Barclays analyst, Douglas Anmuth, suggests that the store closures will likely benefit Netflix, the dominant American renter of video via mail and Internet streaming. Blockbuster has suffered in recent years as Netflix has grown, though the former has also been impacted by purely digital services. These include Hulu, YouTube and the iTunes Store, the last of which also sells movies and TV shows in addition to renting them. Digital remains a relatively minor contribution in terms of industry rental profits.

By Electronista Staff