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First … Define Your Terms

3 Aug, 2004 By: Holly J. Wagner

I think it's great that Blockbuster has figured out that rental revenue is hemorrhaging and is turning its business around. The chain is owning up to trends we have seen for a couple of years, most notably getting into used trading in a big way.

But I had to bristle a couple of weeks ago when, in the company's second-quarter financial call, CEO John Antioco claimed he was after “first-mover advantage” in the used trading field.

I know it sounds good, but Blockbuster was very late to this game. TransWorld stores have been trading in used DVDs for years (and buying up other chains that did, including Second Spin and Wherehouse). Movie Gallery has been trading in used games and movies — not just rental selloff — for some time. Djangos, which until recently only sold new and used goods online and got its used stock from its network of independent retailers (who bought from consumers), also started buying from consumers online a bit over a month ago. The music industry pioneered the model well more than a decade ago with CDs, and most of the retailers from the music side of the industry have been trading used product for decades. Movies crept into their mix nearly as soon as DVD caught on.

Blockbuster's first big step into used-disc trading started with its purchase of the Movie Trading Company — a small Dallas-based chain started by the founder of CD Warehouse — in late 2002 to study and ultimately start the national rollout we are seeing this year. Meanwhile, some other music industry alums got busy in the Northeast and created the small but growing chain PrePlayed.

It's a constant frustration that financial analysts who cover this industry seem minimally aware of how it works and how it's different from other forms of retailing.

So it's not all that surprising that Antioco would claim the chain will snap up the “first-mover advantage” in used-disc trading. Heck, it sounds great. It's just not exactly true.

I have little doubt that Blockbuster can become the biggest chain in used movie and game trading. I even think it won't take the chain all that long to do it. But following others (by years) into a business segment is a long way from my definition of a “first mover.” Call me cynical, but it makes me wonder what else on those calls might be more hype than fact.

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