Blockbuster, Inc. (BBI)

Debt is the grimm reaper to BBI, not NFLX. Cash flow has turned positive recently--enough to service debt and reduce the threat of failure. The success of recent promotions has clearly demonstrated that having actual store locations is important to this business, and may actually handicap NFLX's growth. The recent announcement to improve store turns should also help BBI. It's a spec, but BBI just might fool most and become a $10-$13 stock--note the CEO put his own money where his mouth is.

It is clear Blockbuster is losing track of what they can do for future results and stability, in my opinion. I've been in their rental stores, and it is just a terrible atmosphere, terrible selection, and just a junky feel to it. No wonder they are getting desperate to get more action at their rental stores...

Old model. Bad service. I have a Blockbuster gift card and can't figure out how to use it. How sad.

This company is to entertainment what chariot manufacturers are to transportation. Only with a much worse reputation. Perhaps one of the most hated publicly traded companies in the country - even the customers who still use BBI don't have much admiration for the company or its tired brand. Last one out turn out the lights, and don't forget to rewind.

I think Blockbuster is finally catching on. They're making some hefty moves towards online movies, which is the next big thing. The trickiest part of their whole business at this point are the brick-n-mortar stores and the waning demand for on-site movie rentals. If they can make use of them (turn them into music, video game, movie stores?), then great, but otherwise, they need to ditch them. Kiosk units are very popular now as well (RedBox), so they could gain some market share there as well. Overall I think they're making the moves they need to.

I signed up just to write this pitch. People who say that the B&M model of BBI is outdated simply have not been into a blockbuster lately. It's near impossible to get a new release on the weekends (a problem that Keyes is aware of).

For those who think that online movies are the new rave, let me know how that HD movie looks when downloading online... BBI rents blu-ray and you don't have to pay for an OC2 to actually download it.

Nothing Blockbuster about it.

Blockbuster together with its subsidiaries, engages in the operation and franchise of entertainment-related stores in the United States and international. The company offers prerecorded videos, as well as video games for in-store rental, and also sells other entertainment-related merchandise. With 8500 stores spread all over, Blockbuster operates an online service offering movie rentals, which are delivered by mail.

Consumer spending in-home viewing is projected to increase in the coming years. Video game industry is also prospering and launching of hardware consoles like Xbox 360 and Sony Play station further aids its growth. Additionally, online DVD rental market is set to boom in U.S and Europe in the coming years. However, Blockbuster has failed to reward itself in this lucrative industry, and the company is piling on huge losses. Of late, store closures and shutting down of international units have been the order of Blockbuster’s business thereby hampering their international business that form around 33% of the revenues. Additionally, rising piracy worldwide poses another threat to the industry.

To add to the woes, the year to date financial performance of the company has been shattered with sales decrease in rental as well as merchandise business. Also, revenue growth rate and same-store sales have been negative for quite some time now. With the recent upswing of 6% in the stock price, Blockbuster’s news of reaching goal of 2 million online subscribers appears as discounted. Management is upbeat on ‘Total Access’, a program to grow their online subscriber base at a faster rate. However, the benefit is likely to materialize only in the long-term. In view of all the above factors, the stock price is expected to slide in future.

Blockbuster swept the country like a bull in a china shop, destroying all that stood in their way. Now, they are now the china. Recent efforts have been too little too late. Their only hope is to beat NFLX at their own game, but NFLX has a 20 mile lead in that marathon, and BBI can't survive long enough to catch up, even if making up ground were possible.

BBI operates on mostly borrowed money, has over a billion in debt and the Total Access is not going to make a come-back for BBI. The recent increasing in on-line member number is simply BBI's in-store member sign up for online service. There is no net gain here.

How can you compete will the constant technology that threatens your business like Netflix. People just don't want to have the inconvenience of having to drive to a store anymore, they want all access from their homes and computers. I think the idea of blockbuster as a store front is going to change dramatically over the next couple years and I don't know if they have the capability to battle that change and win.

Even when they were the 800 pound gorilla they couldn't make much money. Now that they have serious competition, they're toast. They're going to have to reinvent themselves and I just don't see that happening.

Blockbuster's business model is in shambles. They've made too many mistakes in the past in rejecting a chance to buy Netflix on the cheap and getting exclusive first seller rights for DVDs. This world isn't big enough to keep the brick and mortar rental stores with Netflix and direct movie downloads.

1. Netflix competing Online service - Total Access : Continues to lose money and cut in the profits for the company
2. Bad Customer satisfaction & a very rudimentary website with poor recommendations (in comparison to Netflix)
3. Bad Foreign Movie selection
3. Additional Liability: Brick & Mortal Retails

Blockbuster had a good business when it comes to atoms, but in the world of bits, it bites!
Netflix and PPV/VOD will crush Blockbuster in the coming years.

Poor old Blockbuster. It's been beaten at its own game. When Netflix's growth began several years ago, BBI could have launched a similar initiative and kept its members happy. But it didn't. And now it's likely too late. As a former Blockbuster member myself, I'd never go back. I'm already set up in a home-delivery movie account with Netflix, and I have no reason to change. My guess is I'm not alone. And BBI -- and its shareholders -- suffer as a result.

Blockbuster's turnaround appears to be real. It should turn quite profitable this Christmas season due to the increasing number of consumers buying HD flatscreen televisions and the move to HD formats in February 2009. Blockbuster is in a unique position to capitalize on the move to HD due to the content requirements of Blue-Ray (cable companies, phone companies, and satellite unable to offer equivalent content as significant content, especially new releases), and downloading such purchased content from the internet is nearly impossible.

BBI, whether they buy CC (Circuit City) or not, will capitalize on the HD new movie sales, and will be very profitable into next year.

At the end of this year BBI will have 4 million subscribers. They no longer belong under $10.00/share.

Earnings might not be through the roof but they are an established company and with large potential.

I'm a big fan of the Total Access program. It is so much more convenient to drop my movies off at a BB store and get movies immediately. And at the same time have my new movies in my queue sent to me. Some of my other friends who are Netflixx also recognize this and are beginning to move over. BB's brick and mortar business may be a liability but it is also a revenue draw. I expect this stock to go up based on the reshuffle due to the Total Access program and their wide scale marketing campaign which sold me.

As a consumer, I've had a complicated relationship with Blockbuster. As a young adult, I really hated what they were doing to the landscape of the local eclectic video store. However, just like McDonalds, Wal-Mart, Starbucks, and other mom&pop killers, they didn't get to be that way by sucking at their business. Reluctantly, I got a membership, and the local stores have pretty much vanished but for niche outlets.

About four years ago, I finally dropped them in disgust after a particularly maddening exchange with a somnambulant clerk over some stupid misunderstanding, and went across the street to Hollywood Video (ticker:MOVI). They were edgier, had a better cult and anime selection, and a much better game rental inventory. But, MOVI has been on a slow decline ever since I signed up with them. The moment my local store's 20something manager finally quit, the turnover has been huge, and it's clear that no employee is really into the job at all.

All this time, I avoided NetFlix. I didn't like the idea of waiting around for movies in the mail. As an Internet nerd, I figured if I was going to be waiting anyway, I should be downloading (a bit more on that later).

But a year back I caught wind of BBI's free e-coupon exchange deal, and saw immediately that this meant I'd be paying less for a BBI subscription with practically double the movie rentals. BBI's mail order business has been lickety-split quick, customer service in the event of damaged discs or whatever has been outstanding, and the library when I signed up was identitcal to Netflix as far as I could tell.

BBI wasn't the first to the mail order game, but they've certainly put a lot of thought into how Netflix works, and are now executing well at beating NFLX by becoming NFLX -- except with 5,000 retail outlets and a universally-recognized brand.

Today, the tie-in with the stores is automatic, and with in-store signups to the online service coming up, they should expect to see their foot traffic see a significant bump this coming year -- and all those returns for free movies means an opportunity to sell new DVDs, candy and soda, etc.

So, NFLX certainly enjoys the first-to-market advantage in this whole mail order movie rental thing, but sadly, nothing they do is patentable or defensible.

So, until the cable companies get their video-on-demand act together for a comparable price (sorry, I still won't shell out for digital cable when I have little kids constantly smearing peanut-butter on my CRT TV screen), I think BBI will be summarily drinking the blood of both MOVI and NFLX over the next 24-36 months or so.

And who knows -- if BBI can rise up and smite NFLX like a proper Goliath, I don't see why they couldn't get a peice of that VOD market when it's matured up a bit, too.

Now, all that said, there is a LOT of room to discuss the financial between these two companies. Just one example: NFLX has under a thousand employees, while BBI has over seventy thousand, but BBI only has five times NFLX's revenue. Oh, and NFLX is posting profits, while BBI isn't. But on the other hand, BBI has five times the revenue, is a solid company with a lot of assets, and can afford to play Intel to Netflix's AMD for a while yet.

FD: I don't own any shares of BBI today (Jan 27) but I fully intend to on Monday morning, hopefully at a price near by Friday's close. That one day 4% drop against NFLX's earnings announcement is pure down-market-Friday jitters, IMO.

Oh, and here's a link. While writing this, I came across a similar position stated on Seeking Alpha: http://media.seekingalpha.com/article/25069