A Swing and a Miss -- Strike Two!10 Aug, 2005 By: Holly J. Wagner
The revenue slide at Blockbuster just keeps on coming, and the chain seems to be making all the wrong moves.
According to the company's second-quarter financial press release, the No-Late-Fees program cost the company another $138.9 million in uncaptured late fees in the second quarter, down just a little from the $145.3 million in late fees not collected in the first quarter. That still puts the uncaptured revenue well past the mark one would expect if we figure to end the year with just $400 million to $450 million in uncaptured late fees.
It'll be interesting to see how Blockbuster Online does on an equal footing with Netflix. Blockbuster CEO John Antioco told analysts the company had always planned to increase the online subscription price when it got to a million subscribers. But now that the only thing Blockbuster can offer that Netflix can't is a couple of free in-store rentals, it's hard to say how compelling that will be.
In fact, it's possible -- even likely -- that there is little overlap between online and in-store customers. Part of the evidence of that is Blockbuster executives telling analysts yesterday that in-store subscribers are renting 10 or more titles per month -- two or three titles past the point Netflix CEO Reed Hastings has pegged as break even. So with the two services on an essentially level playing field at last, it will be interesting indeed to see who stays with which service, and who trades off.
So industry scuttlebutt now says Blockbuster will hike the price of its one-out, in-store Movie Pass by $5 this month and add 50 cents to the cost of an a la carte DVD rental. If that happens, it only goes to show that Blockbuster will have to survive by pushing enough customers online to justify closing stores, getting rid of some overhead. Movie Gallery, on the other hand, is at least testing low-overhead vending machines that could take some of the pressure off.
Antioco said "thousands" of independent stores will have to close in the next few years. But why should all the closures fall on indies? Blockbuster added one net U.S. store in the first six months of this year, compared to 81 in the first half of last year. Soon, just refraining from opening new stores won't be enough to stop the bleeding.