Blockbuster's CEO Begs for Patience as Profits Keep Dropping and Stores Keep Closing

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Blockbuster CEO Jim Keyes
Blockbuster sent word at the end of the day Thursday: It had a terrible third quarter -- profits again down by double digits, millions hemorrhaged even after adjusting for debt refinancing and the sale of its European operations. And yesterday came word, per the release, that the Elm Street-based videotailer would be "closing no more than 115 domestic company-owned stores during the fourth quarter of 2009, in addition to the 216 that have already been closed through the third quarter of 2009." Hence the huge pre-market sell-off -- the stock was down 15 percent, to a whole 70 cents, before the opening bell.

CEO Jim Keyes, ex of 7-Eleven, begged investors in a conference call Thursday to be patient as it rolls out the come-and-get-it, anyway-you-want-it future that includes those SD digital download kiosks we wrote about earlier this week: "I know a fair bit about convenience, as you can imagine," he said, "and if you cut through the noise and clutter of our business, it's all about providing customers with the most convenient access to media entertainment." The transcript's a riveting, revealing read: hopeful (Keyes points to the success of direct-to-video Blockbuster Premieres, an exclusive line of titles that includes The Line with Andy Garcia and Ray Liotta -- never heard of it), defiant (despite the hundreds of brick-and-mortar shutterings, he insists "the physical stores also represent an important point of differentiation for our total access business, with a vast majority of our subscribers taking advantage of their in-store exchange privileges") and pragmatic. Says the CEO about the declines in revenue, quarter after quarter after quarter, it has forced the company to spend a lot of time and capital doing what it should have years ago: re-inventing the antiquated, broken business model.
If you only provide movies through a vending machine, you aren't convenient. If you only offer streaming content or if you do offer streaming content but only offer older movies, you just aren't convenient to everyone. If you only provide digital movies to the computer or to the home television, you aren't convenient. If you only provide movies by mail, you aren't convenient. If your platform is closed, requires a PC, a set-top box, or if your ecosystem is not interoperable, you are just not convenient. And if your movie offering is through channel 999 video on demand, it certainly isn't very compelling, descriptive, or entertaining and certainly not convenient.

Because of the many changes in our industry, technology changes, distribution changes, channel changes, window changes, it is very easy to lose sight of what is important to the customer and it is our opportunity at Blockbuster to solve this problem for the customer with our goal being very, very simply to make it convenient, make it more entertaining, make it easy to experience, and make it more compelling and personal where the customer gets to control his or her own choices. ... But please keep in mind -- business transformations do not happen overnight

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