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Summary:

So, Blockbuster’s genius CEO, Jim Keyes, wants to combine his struggling retail giant with Circuit City. WHY? It’s the kind of deal you can only justify if you’re coming off a major spring break bender. Otherwise, I don’t see how two blocks of lead can float. […]

So, Blockbuster’s genius CEO, Jim Keyes, wants to combine his struggling retail giant with Circuit City. WHY? It’s the kind of deal you can only justify if you’re coming off a major spring break bender. Otherwise, I don’t see how two blocks of lead can float. Why? First, Netflix and Amazon are, respectively, eating each company’s lunch. Second, a successful retail experience is now either big box (Wal-Mart) or deluxe (Apple).

  1. Maybe the grand idea is to obliterate CC as we know it, and transform the existing Blockbuster retail locations into GET YOUR MEDIA AND YOUR MEDIA PLAYER TOO shops…

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  2. @ Gee,

    And what are the odds that this would actually work. Paidcontent puts it best when it poses the question: haven’t we seen this movie before. The CC+Napster deal didn’t exactly set the world on fire.

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  3. Om, I’d say there are two possible reasons:

    1 – Buying CC might get him retail outlets on the cheap which could be converted to Blockbusters or have video rental embedded inside the stores. Blockbuster superstores that offer much more than video rentals might provide excellent shopper metrics (time in store, $$ per purchase, etc)

    2 – The product lines in CC are complementary to BB and it could simply be a value play. (Which, to your point, could also be a distraction)

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  4. Good point Salim, but the big issue, is how to maximize return per squarefoot. I think video rentals are clearly not the way to go. As netflix has shown, physical space can kill the margins. I think taking BBuster and rolling into CC sores and shutting down BB stores might make a lot of sense. But that’s about it. I think such big box stores and the mergers never really work out properly.

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  5. Very true. I’m amazed they took so long to get online and have essentially lost that race to NetFlix. It’s one of those “stitching two corpses together doesn’t make one live person”.

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  6. I doesn’t really make sense just about anyway you look at it, however CNBC is reporting that Carl Ichan has agreed to bankroll -at least part- of the acquisition price.

    …and we know that Mr. Ichan is usually a good poker player…

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  7. @ Nitin

    I missed that bit about Icahn. Did he say why he was willing to bankroll the deal? Agreed he is a good poker player, but are the stakes big enough to play in this case?

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  8. Om,

    I didn’t get the Icahn angle myself, since the whole thing just looks like a deadly embrace to me.

    Anyway, here’s the link:

    http://www.cnbc.com/id/24112408

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