11 Comments

Summary:

Dish Network and Carl Icahn have joined the bidding for Blockbuster in advance of a bankruptcy court auction next week. But after years of failing to adapt, will a new investor or management team be able to turn around the beleaguered DVD rental firm?

blockbuster-media

Blockbuster has spent the last year dealing with bankruptcy filings and shedding assets in an effort to turn itself around, but that process is nearly over, as it will finally go up for auction in bankruptcy court next week. The Wall Street Journal reported Friday that ahead of the auction, Dish Network and activist investor Carl Icahn have both submitted bids for the beleaguered video rental company. They will compete with bids by a group of hedge funds led by Monarch Alternative Capital that hold a chunk of Blockbuster debt. But will any bidder be able to help bring Blockbuster back from the abyss?

Blockbuster has tried in vain for years to turn its business around, but many of those efforts have been too little, too late. The firm tried to augment physical rentals with a DVD-by-mail offering to compete with Netflix, but the service failed to catch on with consumers. Ditto for its online video-on-demand service. And though it got into the DVD kiosk game as a counter to Redbox, it has so far failed to slow the growth of its competitors’ $1 movie rentals. In a last-bid effort to create a viable business, Blockbuster has been busy slashing its number of retail locations.

Throughout the years, Blockbuster has been unable to leverage its brand and massive user base to transition its business and embrace new revenue models. In some respects, there was a failure to recognize new markets and capture them before smaller, more nimble competitors could become entrenched. But even when Blockbuster entered new markets, there was a failure to execute and win over users in those markets. It seems that Blockbuster was too tied to its store-based rental service to be able to make an impact with other revenue opportunities.

With a Dish bid, there’s at least the chance of creating some synergy between Blockbuster’s video rental service and the satellite operator’s pay TV service. Dish could sell subscriptions in-store or provide value-added services to current subscribers, and perhaps even create new revenue models that could be realized in its negotiations with cable programmers. But even that might not make sense, given Blockbuster’s inability to turn a profit and the deep debt burden that it is buried under.

The bigger question is whether new investors — and specifically new management — will be able to change that. After failing to steer the ship through troubled waters, Blockbuster CEO Jim Keyes will clearly need to be replaced. But any replacement faces challenges in transitioning a flailing legacy business in a new digital world. Just look at Tim Armstrong’s struggles at AOL or Carol Bartz’s efforts at Yahoo to see how hard it can be to pull a viable business out of the rubble. Without a clear strategy for dealing with new consumer behavior, it’s not clear how Blockbuster will make itself a viable business again.

Photo courtesy of Flickr user Andrew Levine.

  1. i have blockbuster by mail & it’s awesome. hopefully they won’t go out of business.

    Share
    1. +1

      Their by mail plan blows Netflix out of the water these days… Blockbuster actually has Blu-ray available! Netflix not so much these days since they’re focussed on streaming.

      Not to mention BB by mail has game rentals as well for no extra charge, free in-store exchanges and none of that 28 days later B.S.

      Share
  2. That is a really interesting article as it clearly demonstrates how companies should respond to consumer trends, but also about how some people can’t let go of what they have, even when it isn’t working.

    Share
  3. HAHAHHAHAHAHHAHAHAHAHA at Blockbuster … Karma’s a bitch ain’t it? That’s what they get for decimating the mom & pop stores of the early 1990s. :)

    Share
  4. Too many people have negative associations with blockbuster for it to ever be a viable business.

    Share
    1. I agree Joel. I haven’t forgotten how that threatened me and sent me to a collection agency for $2.99 that I didn’t owe. I swore I would never deal with them again and I told LOTS of people about that and directed them to Netflix instead. Long rot Blockbuster in corporate Hell.

      Share
  5. If blockbuster wasn’t so expensive they might of had a chance to live. Their mailing program sucks, tried it twice, and yeah took 4 days to get a DVD by mail each time, and 3 days for them to receive it while the distribution center it was sent to was in the same region as I am in.
    Yeah too late blockbuster…too late…even tried screwing me on a rental as late when I wasn’t late, foolishly I paid it and I shouldn’t have, so screw you blockbuster.

    Share
  6. Screw you Blockbuster and screw your “family-friendly” business model. You’ll never be relevant again….you blew it, dumb-a$$es! Censor that!

    Share
  7. Well, Blockbuster’s streaming service has done nothing to win me over. New Year’s Eve we wanted to see a movie that Netflix didn’t offer on its streaming service, so I tried Blockbuster’s. Instead of the smooth, full screen service Netflix provides through a browser, I had to install a program, then watch the movie in a Blockbuster window, with a degraded picture. I only have 3.0 DSL, but Netflix handles that fine, giving me a DVD-quality picture, and is only kept below HD because of my slower connection. Because Blockbuster was in essence being asked to cannibalize its storefront business by developing a streaming service, it just didn’t have its heart in it, and it shows.

    Share
  8. I like the $1 movie rentals from the Blockbuster Express Kiosks but I think that any DVD rental store will fail in the coming years. It is unfortunate for small stores and even large chains like Blockbuster but the reality is that this kind of commerce is becoming outdated. There are so many ways to rent movies without leaving your home that really make it difficult for these stores to succeed.

    Share
  9. You know it serves themn right. I stopped using them over a year ago, maybe 2. They were money hungry, and crappy customer service. Plus the online was way to pricey. You have internet and tv fees and yet they still wanted $5 to rent a movie. Netflix is the way to go! But they need more movies to watch(newer ones). Go Netflix! Bye Blockbuster

    Share

Comments have been disabled for this post