Blog Post

Blockbuster Posts Loss, But Gains Online

Blockbuster posted its biggest loss in six quarters Wednesday amid waning store revenues and heavy investment in its online channel.
“Our results were impacted by our investment in the growth of Blockbuster Total Access and by an extremely tough in-store rental market,” CEO John Antioco told the Associated Press in a statement. That’s code for: “Our stores aren’t doing very well and we’re betting big that online will save us.”

Betting big, indeed. Bloomberg reports that the company increased ad spend by 95% to lure away Netfilx subscribers. So is the investment online paying off? It looks like it might be.

Despite continued losses, the company’s quarterly revenue rose slightly by 5% to $1.47 billion over the previous year. Blockbuster added an impressive 800,000 subscribers to its mail-order service in the quarter — nearly double that of Netflix’s most recent posting — bringing the total number of Total Access subscribers to 3 million. By comparison, Netflix currently has 6.8 million subscribers achieved over a 9-year period since first launching. The second-moving Blockbuster is clearly growing at a faster rate, perhaps largely due to its brand awareness.

One interesting aspect of all this is the relationship between loss-leading retail stores and Blockbuster’s online service. Perhaps the biggest advantage of Total Access is the ability to quickly return/check-out new movies spontaneously at local stores using your online membership. As an added bonus, Blockbuster gives away free monthly in-store movie and game rentals, something Netflix can’t compete with (Disclosure: I’m a Blockbuster online member).

Still, the larger Netflix expects Q1 revenues to beat estimates, though it reduced future revenues citing increased competition from Blockbuster, which will also compete with Netflix in the still-nascent download market. Everyone loves a good fight.