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.
"I pity you."
Me too... That poster is probably a CPA who works for BB.
You might enjoy The Aviator (Howard Hughes in his prime years' story)a good film about all American guts and ingenuity. Just read of a Australian "Hercules" (Hughes designed aircraft) delivering much need supplies to tidal wave disaster site. It's rated PG-13.
Wrong. They made money exactly because people were following the rules. That is, they paid the late fees when they did not turn the videos in by the specified date.
It is no different than a rental car that you decide to keep past your original turn-in date. Because you and the rental agency agreed in advance what the "late" fees are, you're not breaking the rules if you exercise them.
Well, if you like a weak plot line buttressed with great special effects, I agree, to each their own.
Ooooo, personal attacks. Yep, you're NY Times material, all right.
BTW, English Nazi...lose the period after the word or....use a comma instead.
Didn't your mother ever tell you something like if everyone liked the same thing the world would be very boring?
As a near-monopoly, Blockbuster went down the inevitable path of abuse of their market position.
1) Late fees - excessive, misleading and the rightful target of a court case. In addition, they are the biggest disincentive to return business.
2) Scope creep - you can't find the rental movies at some Blockbuster locations for all the junk shoved up front in the stores - used DVDs at a ridiculous markup, candy, game supplies, etc. etc.
3) 'Marketing synergy' - sorry, I don't want to hear monitors blaring ads at the video store the same way I don't want to see commercials at the cinema. Target audience doesn't always have to equate to captive audience.
4) Game rental policy. I am an adult and an honest person. Providing ID and/or deposits on game software (hardware - well, OK) is insulting and pointless. If a few irresponsible people cause problems among billions of rentals why declare martial law throughout the entire chain?
I joined Netflix and smile every time I get a disc in the mail - partially because I have a movie to watch but mostly because I won't be driving to Blockbuster again!
Agreed.
I have a big monster TV that can be upgraded to HD. I am confused as to the value of HD, since I do not watch sports. Will they have to re-release movies in the new format? Will everyone's present libraries of movies become obsolete? I don't own many, but Peter Jackson (Lord of the Rings) has made a lot of money off me...
HD is now the issue to watch. BB has been slow to offer regular content on DVD. It'll be interesting to see how BB handles the HD format.
If it weren't for the special effects, both movies wouldn't be worth anyone's time or money.
Unfortunately, that might be the problem with a lot of today's movies. The special effects have taken over. They're being used to compensate for weak plots.
"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? "
Bingo! Blockbuster is notorious for failing to file returned videos properly, making customers pay late charges for movies that were not late.
For an average of about $15, considering we buy new releases at $20 and get a number of cheaper sales movies from $6 to $14, we find that buying beats the movie theater and renting.
Our entire HDTV and surrund sound system cost just $3,000. Over the life of the equipment, that is just $25 a month plus movie costs.
I also loved "I Robot"--but I like "A I" by Spielberg, too. Robots as a metaphor for the question of Free Will are a favorite theme.
"Will they have to re-release movies in the new format?"
Studios will and right now there are two competing formats with studios lined up on both sides.
"Will everyone's present libraries of movies become obsolete?"
I believe there will be manufactures of DVD players that be backwards compatible. How that will mix in with the two competing HD DVD formats, I don't know.
For a great information site go to:
thedigitalbits.com
I thought I Robot had a lot of levels in the movie, like the Matrix.
Of course not. I'd be bored out of my skull if there weren't any liberals to kick around.
Well I'm not a liberal but there are two posters on this thread that likes I Robot.
Since then, we have enjoyed the investment tremendously, and it cost less than a vacation than we might not have gotten anything out of...with netflix, there's always a movie night. And the bathrooms in the theatre are clean...
I don't care to buy movies because I don't like storing them. I can remember when the kids were small and I was snowed under with all those videos and boxes.
Wasn't it sad about the Matrix? The first of the series was wonderful, but the second so ghastly, so appalling--I never even bothered watching the third.
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