When Blockbuster (s BBI) first announced its 28-day exclusive deal with Warner Bros. (s TWX) back in March, giving it a four-week head start on rentals of new releases, we were skeptical that the plan would work. After all, who lines up at Blockbuster on the first day a movie’s released on DVD to rent it? Turns out, more people than we thought.
Or at least, that’s what early evidence suggests after the rental company has had some time to see how consumers react when Blockbuster is the only game in town for renting a new release. On his company’s first-quarter earnings call yesterday, Blockbuster CEO Jim Keyes said the deal with Warner Bros. — which gave exclusive access to rent new release titles like The Blind Side and Sherlock Holmes for the first four weeks of their release — was one of the contributing factors in growing same store comparable sales during March.
“The availability of a 28-day window on two very important titles, we think certainly contributed to our improvement,” Blockbuster CEO Jim Keyes said on the company’s first-quarter earnings call.
In addition to its exclusive window with Warner Bros., Blockbuster has deals with Sony Pictures Entertainment (s SNE) and 20th Century Fox (s NWS), which could help the momentum continue, particularly as the deal with Fox gives Blockbuster exclusive rights to rent last year’s blockbuster Avatar during the first 28 days of its release.
“Customers aren’t going to immediately change their patterns and decide that they’re okay waiting another 30 days to see Avatar. They’re going to want to see it day-and-date,” Keyes said.
Keyes pointed out that 60 percent of consumption for DVD releases happens during the first four weeks, which gives Blockbuster an advantage over the competition, in particular Redbox (s CSTR) and Netflix (s NFLX), both of which have agreed to their own deals with Fox, Universal and Warner Bros.
At the same time Blockbuster is striking deals for guaranteed access to new release titles, Netflix and Redbox are giving up on the first 28 days of a title’s release in exchange for more favorable pricing — and in Netflix’s case, access to more streaming content.
However, while Blockbuster had a strong March, Keyes warned that investors and analysts shouldn’t expect same store comp sales to rise every month — after all, the company is at the mercy of whatever new titles that might be released month-to-month. It is also constrained by an inability to advertise that exclusivity — or at least, advertise as much as it would like — due to liquidity issues that it is facing.
Not to mention, having better same-store sales in March was just about the only good news to come out of the company’s earnings call. Blockbuster’s revenue fell 13 percent to $939.4 million during the quarter, with same-store sales declining 7.1 percent over that period. On weaker sales, the DVD rental firm posted a loss of $65.4 million, or 33 cents a share, during the quarter, compared to a profit of $27.7 million during the prior year’s first quarter.
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