The Holidays Were Not Kind to Blockbuster As Performance Was "Well Below Expectations"

By Robert Wilonsky Wed., Jan. 20 2010 at 5:43 PM

Categories: Biz, From the RTF Dept.

Shortly before the end of the year, Blockbuster CEO Jim Keyes told me that the Dallas-based videotailer is a "football team that's rebuilding. At first, the press is all over you. They're gonna hammer you, tell you you're dead, you'll never be as good as you were. Meanwhile, you're slowly building positions with strong players, and in three years you've got a winning team." If that's the case, consider this the latest injury report.

Shortly after the closing bell today, Keyes reported that holiday sales were way off -- meaning, 2009's expected net loss will be steeper than previously thought (the figure will likely come in close to $193 million). Said Keyes in a statement:

"During the fourth quarter we redirected our efforts to restore top line performance, especially for the month of December as we tried to leverage the holiday season. We increased inventory levels to support a higher in stock availability and invested in advertising to drive traffic in stores and online. In spite of these efforts, our performance during the holidays was well below expectations."

The holiday dip was especially significant because Blockbuster usually gets 30 percent of its annual revenue during the fourth quarter. In related news, the stock remains affordable.

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I love it when people use sports analogies when they aren't applicable to the situation at hand just to confuse people: "Our backs are against the wall" "We're going take it one game at a time" "get back to blocking and tackling" "We're going to come out strong in the 2nd half." The market cap for Blockbuster is down to a measly 95.12 million. Instead, they should use sailing analogies: "We're taking on too much water." "We're dead in the water." "We're sinking!" "The captain goes down with his ship." "We just hit an iceberg." "ABANDON SHIP!!!"
As a former employee of Blockbuster, I am giddy at the prospect of BBV's failure. Thank you, America!
The Blockbuster business model: 1) Piss off each and everyone one of your customers one at a time when you are the only player in the game. 2) Ignore your competition. 3) Remain in denial once competition slaps you in the face. 4) After your competition hands your your ass, institute a "no late fees" policy that's not really a "no late fees" policy, further pissing off your customers. 5) Become astounded when your customers leave you. 6) Make comments like: "Institutional memory�how they stuck me with a late fee back in 1992," Keyes says. "The bloggers, they're venting over that." 7) Continue to be surprised when your former customers dance on your grave.
"Does Netflix still charge extra for Blu-Ray?" I don't know. I don't have a Blue Ray player. Since I get most my movies through streaming download, that is what matters to me.
Blockbuster had their hay-day, now the game has changed. Much like the airlines and in-store CD sales, they had no problems when they were the only game in town and could charge large fees for late returns, because that's all there was. Now, with NetFlix and the ability to stream movies thru Apple TV and such, we don't need the "big Box" stores to overcharge us anymore - we've found other options.
"Let's see, I can play (sic) Blockbuster $20/month for DVD rentals by mail ...." Blockbuster offers a 1 DVD out with no store exchanges plan for $8.99. Does Netflix still charge extra for Blu-Ray?
I would argue their best bet is to either retire from the game now or sign with another team who can leverage their brand, ala Deuce McAllister.
Blockbuster is headed towards the physically unable to perform list.
Let's see, I can play Blockbuster $20/month for DVD rentals by mail and pay extra for streaming downloads. Or, I can pay $10/month for Netflix and get all of the streaming I want and 1 physical DVD out at a time. And, if I need another DVD rental, I can go to Red Box for a little more that $1. Gee, which should I go for?
I saw a tech working on one of the little red rental kiosks and asked him how business was doing? He said the machines were busier than expected and the particular machine he was currently fixin' was showing signs of heavy use. Nice problem to have!