Posted on 01/02/2005 11:07:50 AM PST by MississippiMasterpiece
It's quite an epic, watching Blockbuster die.
The nation's No. 1 video chain hopes to prolong its life with a hostile bid for the No. 2 video-store chain, Hollywood Entertainment. But make no mistake - it's dying. The whole video- store industry is dying, too. Meanwhile some high-rolling financiers are picking over the corpses.
Renegade capitalist Carl Icahn has emerged as the largest investor in both Texas-based Blockbuster and Oregon- based Hollywood. Icahn is trying to put the chains together in a $1 billion deal. He'll most likely try to turn a fast buck with synergies, economies of scale, cost- cutting, restructurings, refinancings and perhaps a little bit of that old-time merger accounting.
Before Icahn's move, Leonard Green & Partners, a storied California-based investment group, bid for Hollywood. The firm, however, lowered its offer after having a close look at the books.
Alabama-based Movie Gallery, the No. 3 chain, also made an offer for Hollywood. So now, there's a testy little auction - replete with hostile takeover threats - making regular headlines.
The truth is that combining Hollywood with any other video-store chain is like handcuffing two drunks together. They could prop up each other for a while, but they are bound to stumble.
This is why entertainment giant Viacom divested itself of Blockbuster in October. Viacom's brass said they believed Blockbuster would be better off on its own. What they meant was that Viacom would be better off without Blockbuster.
Shortly after the spinoff, Blockbuster took a $1.5 billion charge against earnings to account for its declining value. As a result, Blockbuster posted a $1.26 billion loss on $4.33 billion in revenues for the first nine months of 2004.
To be sure, Blockbuster, Hollywood and other video stores still throw off plenty of cash and have seized video games as a new source of revenue. But their glory days are long behind them.
One reason they are still alive is because cable and satellite providers have failed to deliver a respectable array of competitively priced pay-per-view choices.
Another reason is that movie studios have propped up video stores as cash cows. Studios send their movies to theaters, then video retailers, and then to TV outlets. The window when new releases were only available in video stores gave Blockbuster its appeal.
But movie studios have learned they can make more money by flooding the market with inexpensive DVDs for sale at the same time they release them to video stores for rent.
That gives consumers an intriguing choice: Why pay $4 to rent when you can buy for $12 to $20 and not worry about pesky late charges while building up a personal video library?
Cheap, lightweight DVDs are easily mailed, too. This feature gave rise to Netflix, which pioneered the online, mail-order subscription model. Unfortunately, this idea is so widely copied - by Wal-Mart, Blockbuster and soon even Amazon.com - that Netflix's days are also numbered.
Meanwhile, McDonald's is experimenting in Denver with kiosks that dispense rental DVDs for $1 in a bid to drive traffic to their food counters. Supermarkets, pharmacies, convenience stores and bookstores also sell or rent DVDs for the same reason.
Then there's TiVo and other digital video recorders, including ones from Comcast and EchoStar. Why suffer long lines and slow-witted clerks at Blockbuster when you can record what you want from TV and fast-forward through commercials?
Just before Christmas, Blockbuster said it would lower its monthly fee from $17.49 to $14.99 for its Netflix-like service. That announcement came shortly after Blockbuster said it would cut late fees for in-store rentals. Blockbuster said it expects to lose income of between $250 million and $300 million for 2005 as a result of eliminating late fees.
Imagine that. Taking a quarter-billion dollars a year from customers who are too busy, too lazy or too forgetful to return their videos. This is a business model that deserves to die.
Blockbuster is killing itself off. Video on demand may have started the trend of killing off video rental shops, but the fact that Blockbuster decided in it's infinite stupidity to do away with late fees will only drive customers away because alot of people will feel they own the product.
Don't forget the fact that good movies are not- or only rarely- made. I never have the desire to watch a new movie anymore.
I quit going to Blockbuster partially because of the late fees, but largely because Hollywood no longer makes movies that appeal to me.
I am sure my age has something to do with it, but most movies today are either too stupid and moronic in trying to be funny, or too oversexed.
I still like Spiderman, Harry Potter, LOTR, and Star Wars type movies, but most of what is out today is just inane and worthless.
Perhaps if Hollywood gets back in touch with adults or people with morals they will again sell a lot more tickets and more videos will be rented or sold.
Just my 2 cents worth.
"Imagine that. Taking a quarter-billion dollars a year from customers who are too busy, too lazy or too forgetful to return their videos. This is a business model that deserves to die."
Bull.
Too busy, too lazy, too forgetful? Don't rent movies with return periods, then.
Maybe the video industry should do what the airline industry did, instead of adapting and changing to match up with the new competative environment, just run to the government for money.
The nice thing about Netflix is the easy learning curve and no new equipment or software to manage. The "we've rec'd movie" and "movie on its way now" in the email is all I have to keep track of.
What caused me to give up on Blockbuster were the maddening lines and the stupid and deceptive "special offers." The sales help would give this endless pitch to everyone in live--and the offers were always complicated. "Buy this service, and you'll get three free rentals." But they didn't tell you that you couldn't rent three movies at once, and had to wait a week between them to force you to come back every week. Then they got rid of all their old movies to devote floor space to video games.
I don't think a network satellite will replace hard DVD rentals, either, because I don't really want to fool with all that downloading. It's easier to load the disk yourself.
...and Netflix actually has stuff that I want to watch.
Try National Treasure. It was AWESOME!
When I received a bill in the mail for a late movie return (they always collected them at your next rental) I knew their days were numbered.
I haven't been back since.
I agree. I hope this is indicative of Hollywood as a whole. Hollywood is destructive to society and I cannot stand all of the dumb celebrities...
Blockbuster is doing away with late fees because that's one of the big draws to Netflix. People's live are chaotic by nature, sometimes you can't scrape up the time to watch the movie you want, under the late fee model what happens is the person either winds up incurring huge fees that annoy them, or they return the movie unwatched which also annoys them. With no late fees the company takes themselves out of a position where the customer will be annoyed at the company for soemthing that isn't actually the company's fault, annoyed customers cost revenue.
I have serious doubts video rental will be dieing, it will certainly be changing. Some movies just aren't worth buying for more than the rental cost. My Netflix subscription has dramatically reduced my DVD purchases, I hated going to video rental stores so I bought, Netflix presented a way to rent that didn't suck, so now I only buy what I know I'll want to watch over and over.
Well, according to the info I picked up in the store the other day, while there will be no late fee, if you keep a video beyond 7 days, it will be converted to a "purchase."
I like the idea of no late fees. I am sorry, but paying 3.50 for a new release and only being able to keep it until the next day is a rip-off.
Blockbuster in general is expensive as heck, so I go to the local grocery store which still has a good selection.
However, the one thing about Blockbuster....I like you can check out tv dvd sets in there.
That is pretty cool. There are some shows I would like to relive, but not enough to buy an entire set...I just want to relive a couple shows that I remember. This way, I can check out a disc or two from a show instead of buying it all.
I think things like Netflix and Blockbuster online will eventually become really popular. The idea is awesome.
I agree with your view that the current crop of movies is to puke for. But that is the reason I like a good video store (as opposed to Blockbuster), they usually have a lot of older real quality movies. My local Mom and Pop store has a special rack for every academy award winner. If you go back you have movies like Lawrence of Arabia, Ben-Hur, Bridge on the River Kwai, Patton, Braveheart, Cassablanca etc..They also have a great classic section, as well as a Sci-Fi (Godzilla, Rhodan, King Kong) and a Bond, James Bond section.
Yeah, it's just too hard to follow rules, isn't it? /sarcasm
Blockbuster seems to have been forced to change. I just started a $19.99 per month plan where I can have three out at a time and return them as many times for more as I like, or keep the three for a whole month.
I had already tried the $14.99 plan (two at a time) at two different stores, since you are stuck at whatever store you get the plan at. I just cancelled before the first month period ended and started a new one at another Blockbuster down the street and cancelled it (I told them exactly what I was doing).
I gave it a rest for a month until I got $15 in gift certificates to Blockbuster for a Christmas gift. I went to one of the same stores and asked them if I could rejoin after taking a break and they said I could start the $19.99 plan since I hadn't ever tried that one!
Good to hear that Netflix works, though, since I plan on trying it after this month. Netflix has all the great foreign/independent films I'll never be able to rent locally.
I quit going to Blockbuster partially because of the late fees,
Too lazy to return videos when you said you would? What part of rules do you not understand?
We quit Blockbuster and went to Hollywood Video because BB had ridiculous 2-day rentals. HV always has 5-day rentals. With kids, etc. you're never sure when you'll get to watch the dvd. That said, we haven't rented a movie in months.
Much cheaper than PPV. A 24-hour viewing of a PPV movie from DISH Network is $3.99, and $2.99 for "Last Chance" showings.
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