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Blockbuster Bows New Ad Campaign, Upbeat on Kiosks

28 May, 2009 By: Erik Gruenwedel


Blockbuster is launching new television and radio ads designed to pique consumer interest in the brand’s multichannel distribution options and variable rental pricing.

Speaking May 28 to investors in Dallas during the chain’s annual shareholder meeting, CEO Jim Keyes showed a clip of “Escape-In,” which highlights renting movies and video games from Blockbuster in-store, by-mail, from kiosks, the Internet or electronically.

The spots represent the first significant national exposure since the CBS March Madness college basketball games in March 2008 for Blockbuster Total Access.

“We still do have the largest share of the consumers, and it is our job to make that transition [from physical to digital] for the consumer easy, seamless and virtually invisible,” Keyes told investors.

Earlier this week in a research note, Roth Capital Partners analyst Richard Ingrassia said that despite “quiet” improvements, Blockbuster Total Access still lacked sufficient marketing support to allow it to capture a larger share of the potential new subscriber pool created by the inclusion of video game rentals.

The chain said it would begin testing online game rentals in the Cleveland area.

Keyes said Blockbuster Express kiosks (with partner NCR) would hold 1,000 new release movies and games  — about double the number of most other kiosks — for both rental and retail. They can be retrofitted for download capability going forward.

“We believe this is a strong platform that gives us a competitive position in vending,” Keyes said. He acknowledged that Blockbuster was “somewhat behind” the competition, a disadvantage he said could be quickly overcome.

Luke Shagets, research associate with Sterne Agee in Dallas, said it would be tough but not impossible for Blockbuster to bridge the gap to Redbox.

He said the license agreement with NCR affords greater flexibility with costs, in addition to the fact that Blockbuster kiosks — unlike Redbox ones — can be altered to offer content electronically.

“It will probably be a fairly high margin business for Blockbuster,” Shagets said.

Keyes widespread adoption of “Any Way You Want It” pricing, including “Choose Your Terms,” now allows consumers to rent by the day, week and month with rates starting from $1.99

“The daily rate offers a better price point if [the consumer is] willing to bring those movies back,” he said. “It actually helps our ability to keep movies in stock.”

When asked by a shareholder why management doesn’t combine classes of stock in order to elevate the share price above $1, Keyes said the idea was discussed two years ago but not implemented due to associated costs. He said the matter would be addressed again in the coming year.

Finally, Blockbuster shareholders reaffirmed the current board of directors, including activist shareholder Carl Icahn.

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