Ailing video rental chain Blockbuster made a baffling bid to purchase electronics retailer Circuit City for $1 billion. The idea is to create a company that is at the nexus of digital media entertainment and convergence. Seems better positioned to be at the nexus of failure and bankruptcy.
Blockbuster first floated the idea to Circuit City back on Feb. 17, but then took the offer public after Circuit City wouldn’t disclose its books. Circuit City says it has “fundamental questions” about how Blockbuster will finance its bid (maybe it could take out a sub-prime loan). Circuit City operates 682 stores in the United States and another 700 in Canada.
Blockbuster CEO Jim Keyes told The Wall Street Journal that he sees Apple’s retail stores as a model for the merger, which makes us believe that Mr. Keyes has never actually set foot inside an Apple store or a Circuit City.
First off, both companies are struggling to find their way into the digital age. Blockbuster’s attempts to fend off Netflix have resulted in epic failure, and Circuit City is losing ground to the likes of Best Buy and Wal-Mart. Loser + Loser does not equal winner.
I’m all for Blockbuster leveraging its real world locations to pave the way to its digital future. But in an industry that is moving entirely to bits, Blockbuster should be looking for ways to convert its existing locations into digital hubs, not adding another 1,300 retail locations.
And Mr. Keyes seems to be missing the allure of the Apple store, which is a sleek, sexy experience with a singular focus on one brand. Circuit City, on the other hand, is just a lifeless big-box retailer where people go to look for a bargain.