TK's MORNING BUZZ: Stock Prices of Blockbuster and Hollywood Entertainment Have Rebounded, So Why Are Both Chains in a Quiet Mode?22 May, 2001 By: Thomas K. Arnold
The remarkable thing about the recent rebound in the stock prices of both Blockbuster Inc. and Hollywood Entertainment is that both chains are in something of a quiet mode, with none of the ubiquitous, in-your-face advertising they once were known for.
It's been about a year since Blockbuster chief John Antioco said ad dollars would be shifting from the mass media toward a more direct consumer approach, and he's held good on his vow. I can't recall the last time I saw a Blockbuster ad on TV, and I'm beginning to miss the sight of a dancing baby and the shrill pitch of someone promising me a guaranteed rental.
The same goes for Hollywood. Nothing, nada.
Out of sight, out of mind? Hardly. Recent financials show Blockbuster continuing to post solid gains in same-store sales and net cash, while its stock price is inching toward a record high of $20 per share. Hollywood's latest financials were doused in red ink, but lenders apparently have enough faith in the chain now that founder Mark Wattles is back in operational control to basically allow debt payments on an as-you-can basis. This confidence has seen share prices more than quadruple from last fall's low of less than a buck, and it appears Wall Street believes Wattles when he blames all of Hollywood's ills on its abortive Reel.com venture (and, of course, prior management, meaning his ex-buddy, Jeffrey Yapp, who was ousted last September).
Does all of this mean that advertising is gratuitous? Of course not. I think Blockbuster's heavy advertising had a lot to do with building the strong customer base the chain is now intent on nurturing through direct-mail and other, more personal means. I also believe Hollywood would advertise if they had the cash -- and the product.
But one thing is certain: This industry is still without a national awareness campaign, a void filled, in the past, by the big chains' media blitz. I don't know if a study exists on the subject, but I'm quite sure that for every Blockbuster commercial that made renting a video seem like the next best thing to micro-brewed beer, a tidy percentage of viewers flocked not just to the nearest Blockbuster, but to any nearby video store. This notion is supported by comments from retailers themselves, many of whom told me they saw a spike in business everytime Blockbuster ran a commercial on national television.
I dimly recall the VSDA talking, once again, about the need for a generic awareness campaign, and even running a test somewhere. Any idea whatever happened with that? Or is it just another noble experiment that failed?
Comments? Contact TK directly at:TKArnold@aol.com