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TK's MORNING BUZZ: By Switching to DVD, Blockbuster Is Doing What the Market Leader Should Be Doing -- Forging Ahead and Not Looking Back

11 Sep, 2001 By: Thomas K. Arnold

Good move, Blockbuster.

The world's biggest video rental chain yesterday announced it would startselling DVD players in its stores and also spend an estimated $450 million toreplace about a quarter of its VHS cassette inventory with DVDs.

An analyst quoted in the AP wire story said the move was "inevitable" but praised Blockbuster for making it "proactively," adding, "They're a littlebit ahead of the DVD growth curve."

That's smart, and that's what Blockbuster should be doing as the market leader -- forging ahead, not looking back.

DVD is the hot baby of the moment, and everything points to continued explosive growth. I believe Blockbuster made a mistake several years ago when it was slow to react to DVD; you might remember that chief John Antioco keptpromising a chainwide rollout, but that didn't happen until relatively latein the game -- and after Big Blue toyed with investing in Divx, the ill-fated (and ill-conceived) pay-per-play DVD variant primarily backed by the Circuit City consumer electronics chain.

At the time, a very respected industry figure told me he couldn't figure outBlockbuster's reticence in regard to DVD. "If you're the leader in your market, which Blockbuster certainly is, you're supposed to be on theforefront of new technologies," he said.

Obviously, Blockbuster has spent the past year or so trying to make up for lost time, pushing DVD rentals in a well-orchestrated billboard and advertising campaign and then including DVD in its "guaranteed availability"programs.

I'm certain DVD played no small part in Blockbuster's decision to seek a strategic alliance with Radio Shack, the mall electronics chain, in which Radio Shack "kiosks" will start to appear in Blockbuster stores.

This is the logical next step. Consumers will soon be able to step into a Blockbuster store and buy a DVD, rent a DVD, and even buy a DVD player. They'll be able to buy a satellite dish and subscribe to satellite service. They'll be able to buy snack foods and, for the folks behind the technologycurve, there will still be plenty of VHS cassettes to rent or buy.

And, oh yes, while the VOD deal with Enron is dead, rest assured that when the studios start selling or renting their movies over the Internet, Blockbuster will be there in some way, shape or form, no doubt front andcenter.

I hope other retailers are learning something. In the late 1980s, Blockbuster was the role model for many independent rentailers, showing them how to buy, how to merchandise, how to compete. Then came Bill Fields and, after that, the VHS revenue-sharing era.

Now, it appears there's a new chapter unfolding. Let's call it "The Prodigal Son Returns."

Comments? Contact TK directly at:TKArnold@aol.com

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