Who's Going to Save Blockbuster? The Movie Studios, As They Go After Redbox.

By Robert Wilonsky Fri., Aug. 14 2009 at 9:00 AM

Categories: Biz, From the RTF Dept.

Shortly after Elm Street-based Blockbuster reported its second-quarter stats Thursday evening, chairman and CEO Jim Keyes hopped on an investors' conference call to explain, yet again, what ails the former video-rental giant. The usual, of course: Netflix, shitty movies, the used-DVD and gaming market, slow transitions to digital delivery and its downloading kiosks, not to mention a heap of debt accumulated during The Second-Greatest Depression. Keyes remains optimistic that Blockbuster will pull out of its tailspin, and the company's reworking its revenue-sharing deals with studios and distributors to keep the doors, virtual and brick-and-mortar, open, but his rah-rah is tempered by more bad news ahead: "We must be realistically conservative about the remainder of this year."

But his biggest enemy is Redbox, whose kiosks are sprouting like weeds ever since Dallas-based 7-Eleven, Keyes's old company, decided to plant those monoliths in front of every single location. Warner Bros. yesterday became the latest studio to warn Redbox (and Netflix) that it ain't pleased with its fer-cheap business model and that it won't be providing new product for a month. You can almost hear Keyes giggling in the full transcript over on Seeking Alpha as he focuses, repeatedly, on Redbox's physical limitations and potential legal battle with Warners (it's already suing Fox and Universal over new-release limits.) Because, sure, customers would rather pay a buck for a rental. But what happens when they can't get it?

While the consumer certainly enjoys the value of $0.99 movies, we are concerned that from the cost of production through the expense of retail distribution, $1 per viewing is not a sustainable industry model. A recent USA Today article, for example, said if consumers figure it's only worth $1 to see a movie at home instead of the $4.50 or so charged by rental chains and video on demand, then it could cripple the economics of today's movie business.

A second challenge is in-stock availability. The physical limitations of a kiosk will prevent 100% in-stock availability on hot new releases, something the customer comes to expect from Blockbuster. ... A previously announced policy by Universal, a recent announcement from Fox, and a new announcement literally within the last hour by Warner just this afternoon referenced creation of a unique vending window which we believe is complementary to Blockbuster's multi-channel approach. A vending rental window would enhance the complementary relationship between Blockbuster stores and Blockbuster kiosks.

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Long live RedBox! I can already see how they are being undercut by their vendors who "had" a successful arrangement/monopoly with rental copmanies --sorry: that day is past. Online delivery and RedBox are the present market model, not an experiment. 7-11 is just fine & continues to plan expansions of these kiosks; the vendors will HAVE to provide them or being to hire more lawyers. The attraction to RedBox is the "impulse gratification" of actual hands-on, coupled with its excellent universal-return to any box value. One dollar per night, stop nitpicking-- you can't find the movies and you can't find the delivery/point of sale like this anywhere else. No Place. period.
I personally love the redbox! I mean I have ran into situations where a new release is not available but I can check online to see which nearest kiosk has my movie and then reserve it. Not only that is they give out promo codes for free rentals once a week!! Blockbuster doesn't come close to giving the public what they want. Family Video is also a competitor in our neighborhood that is "brick and mortar" and has a better business model than blockbuster with free kids rentals and $1 new release rentals. You don't see the news reporting anything about them! Blockbuster needs to stop complaining about competitors and do something about their business model.
Plus I am in the area anyway..getting my cigs..lotto tickets..rolling papers..colas..munchies..candy..super old hot dogs..chips.. OH YEA..and returning a flick from last week at $1.07 per day.. Go Red Box..
Maybe Blockbuster can ask the newspaper industry how pleading with the public about an "unsustainable" competitor is going? Does it help get them to reach into their wallets and help you out? That's what I thought... If the model is unsustainable, start making cuts at the top by cutting actors' and directors' salaries. The bottom line is that customers are only willing to pay $1 a night to watch your crappy movie - deal with it.
Let's call this what it is: socialized movie rentals.
I think the $1 per rental is a bit misleading, not by the observer but by the folks quoted. It is only $1 if you rent it after 9 p.m. and return it before 9 p.m. I use Redbox and usually pay $2-$4. Having said that I am not sure when the last time I was in a Blockbuster was and even if my membership is still good. Blockbuster should have seen these threats coming. It seems the Execs were either incompetent or were too concerned with maintaining a temporary stock to innovate and maintain a viable dominate force in the market. The company deserves what it gets.
1 per viewing? No, redbox is $1 per NIGHT. Plus i can look up the inventory at each and every redbox from my desk at work, reserve the movie I want, and pick it up on my way home. (and it has always BEEN THERE) Not to mention, I can return it to any redbox I darn well please. It is no wonder blockbuster is quaking in there debt ridden boots. I HEART Redbox, and if Universal doesn't want on the gravy train, then let them fail ( provided we don't have to bail them out too)
I noticed that Keyes left out one other reason Blockbuster is failing: Keyes. I don't know why the DO gives BB such press anyways. Sure, their "HQ" is based here, but after laying off dallas folk year after year, i'm pretty certain that more than half the corporate roster is outsourced.
<i>100% in-stock availability on hot new releases</i> Yeah about that -- I haven't rented from Blockbuster in 3-4 years. But once I was going in after the "Hot New Release" (whatever it was back then), and sure enough, not in-store. Not sure how it is now, but back then the "policy" was you need to rent something else, then make note of it when you check out, then when you bring it back have them pull it up in the system and get the free rental. What a crock. They would not honor the "in stock or it's free" mantra unless you rented something else on the spot. So it's basically a bait and switch scam. No wonder that fat bloated corpse is falling apart. And now they want artificial price supports? The only bright side to this is enjoying watching this dinosaur die a slow painful death.
"100% in-stock availability"?????? I'll admit it's been a while since I've stepped foot in a Blockbuster, but in the past, I've ALWAYS assumed that the new releases would be out-of-stock. I've never known anything different. Based on the frequency of Blockbuster posts on this board and the company's infinite idea factory, it has taken on a shapeless blob identity in my mind.