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Video rental chain Blockbuster announced last week that it will close up to 960 stores by the end of 2010. Their SEC filing paints a less than pretty picture, where 18% of their stores are unprofitable, and another 47% are considered "non-core" that perform poorly compared to the remaining "core" locations. With 4,356 stores presently, the closures represent more than 20% of their locations whose lights will go dark in the next 15 months.
On other fronts, Blockbuster is hoping to expand the number of its kiosks from under 500 currently to 10,000 by mid-2010, and it most likely wants to grow its subscriber base for the Blockbuster Total Access movie-rentals-by-mail program.
That's going to be a challenge, because they have major competitors on both fronts. Kiosk vendor Redbox has been making many headlines as they continue to grow in popularity and they currently have kiosks in 15,000 locations already. Video rental by mail pioneer Netflix is synonymous with the concept, and their red envelopes are being sent out to more than 10 million subscribers. This makes Blockbuster's 1.6 million subscribers look like a good start, but it definitely shows a need for growth on Blockbuster's part in that market.
Will Blockbuster survive, or will the familiar blue and yellow brand go the way of so many mom-and-pop stores that it helped shutter when it swept the nation so many years ago?
It would be odd not to see the stores any more, but I have to admit that I've only patronized Blockbuster a handful of times since I signed up for Netflix several years ago. Their high rental prices, short return schedules, and limited selections continue to be a glaring downside to their model, and their only upside, which is for impulse rentals, is quickly being eroded by the prevalence of Redbox kiosks.
Two weeks ago, I went into a Blockbuster store to rent a new release on the spur of the moment. While they had plenty of DVD's of the title in stock, they didn't have any on Blu-ray. No, they weren't all rented out, they never got any in the first place! Rather than disappoint my kids, I paid my rental fee and had the pleasure of paying an extra dollar for not being able to return it the next day.
The whole experience reminded me of why I rarely visit Blockbuster and the high cost and low convenience of their business model just doesn't fit in with the present day. I hope they can grow their Total Access business so that it's always a competitor for Netflix to keep them from becoming complacent. If they can get their Blue kiosks in more locations (and stuff them with Blu-ray discs) I'd be happy to see that as well.
If they can't, they're going to be seeing red everywhere they go, even in the board room.
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