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Is it Time to Roll the Closing Credits for Blockbuster?

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In Hollywood, the opposite of a blockbuster is a flop. This week, it’s starting to look like Blockbuster (s bbi), the video-rental chain that once dominated the industry, might have to change its name. A more accurate one might be Mega-Flop. That, at least, is the consensus after Blockbuster warned that it would report yet another dismal quarter Wednesday evening.

Analysts aren’t using language quite so dramatic, saying things like “we must question how long the company can continue as a going concern given its rapidly deteriorating performance.” Which is what Wedbush Morgan’s Michael Pachter said about the company this morning.

A “going concern,” of course, is Wall Street parlance for a company that can stay in business. And that’s what it’s come to for Blockbuster: After years of battling Netflix (s nflx) and other startups like Redbox, when it made several unsuccessful attempts to dig its way out of financial losses, Blockbuster may be faced with bankruptcy or even liquidation.

Hopes for a Blockbuster turnaround were already dim Wednesday when the company said that its rentals during December were far enough below expectations that its 2009 loss will be even larger than it had warned earlier — as large as $193 million. Efforts to shore up revenue with a new ad campaign and a larger DVD inventory failed to stimulate customers into more rentals, CEO Jim Keyes said in a statement.

On Thursday, Blockbuster’s stock plunged 33 percent to 49 cents a share — you can now sell several shares of Blockbuster and still not have enough cash to rent a DVD from one of its stores — and analysts churned out bearish note after bearish note. One of them said Blockbuster executives are running low on options to turn around the business. Another called its brick-and-mortar operations “a dinosaur.” Standard and Poor’s lowered its outlook to negative –- often a red flag — saying it expects its credit situation to get worse. Wedbush’s Pachter summed up Blockbuster’s plight well:

“Over the longer term, it appears that customers are happy with the choice of convenience offered by Netflix and low price offered by Redbox, leaving Blockbuster with the waning customer base that desires broad selection (not offered by Redbox) and immediate gratification (not offered by Netflix) at full price.”

Back when the first Harry Potter movie came out, Blockbuster was the giant in video rentals. The company even had the chance to buy Netflix for $50 million in 2000 (Netflix’ $2.8 billion market cap today is 56 times that bid). It didn’t because –- ironically enough -– executives were concerned that Netflix was losing too much money.

Instead, the video chain decided it would price Netflix out of business, developing and endlessly tweaking a DVD-by-mail business that never quite put a dent in Netflix’s growth but did bleed Blockbuster of capital and profits. Now investors are half-expecting the curtain to descend and the company to play its final credits.

12 Responses to “Is it Time to Roll the Closing Credits for Blockbuster?”

  1. jo jenkins

    Censorship is bad, Blockbuster censored art. Blockbuster gets what it deserves. I for one stopped using their service in 2003. Blockbuster go away.

  2. Nomo Blockbuster

    Please DO close down Blockbuster. The company is a huge nuisance and has become a disappointment to say the least. Now that Movie Gallery is bankrupt, Blockbuster shall soon be in the same boat, too.

  3. plaese don’t close down blockbuster that is my favorite video store i usually buy newer copies of movies over there if it closes down them im going down down with a huge nevours break down!

    • I agree I love blockbuster. The one across the street from me closed a few months ago, and now the 2 closest ones to me are now closing. I don’t nor will I use netflix or redbox. I have no intentions of ordering my movies or video games online. I want to go to a store and rent them.

  4. I can make Blockbuster profitable tomorrow. Start renting porn! There’s still a segment of the population that would go to a brick and mortar store to get porn, would even thrill to the option. Blockbuster has done the same thing for 20 years and refused to innovate with the times and now must die!

    • No, porn video stores have long died out. Porn off the net killed them and nothing will reverse that trend. Getting it off the net means no one knows you’re watching it. And the porn video store did the same to the porn movie theater. Porn video enabled you to watch it without being around strangers or seen by those you know (and know you) in theater. And now free porn is killing off the “traditional” porn industry. Ah, life. It is always evolving.

  5. Around here, video stores are dying. One just closed up shop. No warning. One day open, next day closed. Talking to one video store manager, he says that ironically the trend has been helping their business. As each competitor closes, they get more customers. He expects there to soon be only two video stores in La Crosse, Wisconsin. His and the other big one on the far south side. He thinks they’ll fold next and he’ll be the last one remaining in the middle of the city by a major intersection.

    But RedBox is starting to pop up everywhere. All grocery stores now have one outside their doors and more and more gas stations are getting them. Their big drawback is a very limited selection, which everyone complains about.

    All trends point to downloadable movies and shows. That is where things will head. If online movies simply drop their prices to half of RedBox prices, even RedBox will soon be out of business. Hollywood will resist doing so until they see the lower prices mean more revenue … or their competitors doing so thus forcing them to do so as well.

  6. Frankly I never thought the RedBox rental box would work, however ever time I pass my local 7-11s there always is someone using that machine. Sometimes even a line. Even in the coldest nights of winter.

    The days of going into a big retail space to look at the boxes of movies have given way to the discovery of new movies through social networks and tools built into NetFlix that learn your tastes.

    We loved you Blockbuster. May you rest in peace.