The LA Times has a similar (though neutral) headline “Blockbuster sticks to the bricks,” but I prefer mine…
Here’s why: Blockbuster is still planning their strategy around brick and mortar stores — and they claim it’s going to make them a profit.
And now, here’s why they’re wrong.
From the above LA Times piece:
“Most people read a lot of interesting headlines, and we enjoy the headlines, about Netflix, Amazon, Apple, so forth,” says Tom Casey, Blockbuster’s chief financial officer, during a presentation at Thomas Weisel Partners’ Annual Consumer Conference on Tuesday. “But what you need to understand is we really have a market that we address that’s nearly $36 billion in size. Video-on-demand is actually pretty small.”
That’s right. The market for VOD is pretty small…but that’s based on previous data, not what will happen.
The VOD services like iTunes, Microsofts/Sony’s movie stores, and even the Cable VOD services are cheaper to run than a Blockbuster brick-and-mortar footprint.
The piece goes on to say:
Blockbuster reported a loss of $44.7 million, or 23 cents a share, in the second quarter, ended June 30, compared to a $34.2 million loss in the same period last year. But same-store revenue rose 9%, and the company reaffirmed that it expects a profit for the year.
See those first lines? Nearly $10 million dollars more of a loss in this last quarter. To beat the increasing loss, they’ll need to reduce operating expenses, which is most easily done by…you guessed it…closing stores.
If the company “expects a profit for the year,” they’ve better get working on integrating Movielink (a company they bought last year to pump up VOD services), improving Blockbuster Online, and shutting down the stores that aren’t working and redirect that money into remodeling higher traffic places (which they’re already doing)
But what if Blockbuster’s lack of VOD services is actually…*gasp* a strategy?
Again, from the LA Times piece:
[Michael] Pachter [a Wedbush analyst] notes that as long as Blockbuster gets customers in stores and studios release movies on DVD before they allow video-on-demand and streaming online, the company will thrive.
Which fits with the “convenience store” that so many Blockbusters have become. Why download a movie from iTunes when you can go to Blockbuster and get the popcorn, soda, candy, and the movie too?
It seems that Blockbuster’s real strategy is just to keep pulling in that slice of the DVD rental market…and wait until VOD takes over the world.
