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The New Adventures of Old Blockbuster

26 Sep, 2011 By: Erik Gruenwedel

With its rollout of a multiplatform movie rental service, Blockbuster re-emerges as a one-stop home entertainment destination

To self-absorbed digital snobs, Blockbuster always will be chided for once employing late fees as a source of incremental revenue — emblematic of a bygone era in home entertainment.

Dish Network’s launch of the $10-a-month Blockbuster Movie Pass is more than an attempt to lure satellite TV subscribers; it’s a major challenge to the burgeoning subscription streaming business model now furthered by Wall Street and championed by Netflix, Amazon and likely others.

How? By incorporating old-fashioned Blockbuster video stores as venerable sentries that afford open-minded consumers the ability to make instant home entertainment choices both on the couch with the remote and on foot — the latter through its tough-to-beat Total Access program. Blockbuster also offers by-mail rental disc movies and video games, and Blockbuster Online's transactional video-on-demand platform is as robust as Vudu.

“There’s barely a person alive in the U.S. who has not been to a Blockbuster store or watched one of their rentals,” said Russ Crupnick, VP and senior industry analyst with The NPD Group. “At their peak just a few years ago, half of the disc rentals in the U.S. came from Blockbuster.”

In other words, that’s a lot of brand recognition.

As recently as 2008, The NPD said there were about 50 million Blockbuster renters in the country, which is twice the current subscriber base of Netflix. Dish now says 100 million Americans live within a short distance of its 1,500 Blockbuster stores. It also operates 1,500 Blockbuster stores in 30 countries.

Since its acquisition by Dish in April, foot traffic in Blockbuster stores is up 100%, according to Michael Kelly, president of Blockbuster LLC. He said Blockbuster has reduced in-store rental prices to better reflect the "local economy" (i.e. kiosks), including offering 99-cent movie rentals and customized return terms.

Indeed, had Blockbuster — not Redbox — been first to market with the rental kiosk, Blockbuster Express might be as synonymous as Starbucks and owner/operator NCR Corp. might be sporting a different corporate color than green.

“Blockbuster was late to adjust pricing, to address late fees and to invest in the stores,” admitted Crupnick. “But it wasn’t Yugo cars, WebTV, BP or Enron.”

While technocrats (i.e. CNET and many analysts) will dismiss Blockbuster on principle, the savvy consumer will recognize Blockbuster’s summer-long marketing push as the “anti-Netflix” as more than just hype.

Stores tout street-date new releases available 28 days before kiosks and Netflix, and Total Access’ ability to return by-mail rentals to stores for immediate in-store exchanges is a godsend to those stuck between disc shipments from Netflix/Qwikster.

Indeed, 75% of movie watchers did so by physical disc in the past three months. This begrudging reality — and the embrace of changing technologies and consumer habits — is what is giving Blockbuster a second chance.

“Unpopular as that may be to the technofascists, it’s true,” Crupnick said. “There’s still just no better way than Blu-ray if you want to watch movies like Avatar or the newly released Star Wars set.”

And Blu-ray isn’t available on streaming.


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