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Big Moves as Home Media Landscape Shifts

17 Dec, 2004 By: Kurt Indvik

It comes as no surprise to see Blockbuster and other major retail chains in home media make dramatic changes in their business models to both stave off the effects of a growing digital business model and to catch a piece of that wave or risk being swamped by it.

Blockbuster's headline-grabbing move this week to do away with the traditional “late fee” and offer consumers a no-penalty grace period is the latest example in a year of dramatic moves by many home entertainment retailers and suppliers.

This latest maneuver by Big Blue attempts to shore up its brick-and-mortar business by blunting the biggest selling point for online rentals (a business Blockbuster is also in): that irritating late fee. Blockbuster claims the new policy has been successful in test markets. We'll have to wait and see if the market share it gains from both traditional and online competitors makes up for however much is lost of its $200 million to $300 million late-fee revenue. But I think the move nonetheless was a dramatic marketing success. The result paints Blockbuster as a dynamic, customer-centric company. As CEO John Antioco observed in announcing the program, even if competitors respond with their own new late-fee policies, Blockbuster, as the largest target of the public's ire over late fees, stands the most to gain by dropping them.

The likelihood that Blockbuster can build market share through the acquisition of Hollywood Entertainment is, at least according to some analysts, not going to pass muster with federal regulators, even as billionaire Carl Icahn tries to force the issue by acquiring more shares of each company, as he did last week. Icahn's latest move may seem both dramatic and, to some, even a little desperate in the face of mounting pressures on the traditional retail and online retail fronts. After all, we now have Amazon.com looming on the eastern horizon, having announced the launch of its own online rental business in the United Kingdom, testing a low-cost model that could be imported to the United States.

There's sure to be more big moves to come soon.

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