Log in


TK's MORNING BUZZ: The 'Other' Blockbuster -- a Money-Losing Chain Struggling to Stem the Flow of Red Ink

25 Oct, 2000 By: Thomas K. Arnold

Spin City, here we come.

I just finished reading the official Blockbuster press release, announcing Big Blue's financial results for the third quarter.

And boy, did the nation's "leading provider of rentable home entertainment" (that's straight from the release) ever do well!

"Revenues Increase 7% to $1.19 billion," screams one of three sub-headlines. "Same Store Revenues Increase For 11th Consecutive Quarter," proclaims the second. "Video Segment Cash Earnings Increase 45% to $33.3 million," blazes the third.

You have to dig pretty far into the copy to find out that the "leading provider of rentable home entertainment" (I like that!) also saw its net loss widen to $19.3 million from $19.1 million in the year-ago quarter, despite a 20% reduction in advertising expenses--which Blockbuster in the past cited as a primary reason for its red ink.

This net loss is almost as high as Blockbuster's cash earnings ($22.6 million) and brings the chain's total net loss for the year to $51.3 million.

As for Blockbuster's "11th Consecutive Quarter" of same-store sales gains, the press release states that the gains only amounted to 1.5% and that "higher same store revenues were driven by strong international revenues."

Huh? To me, that indicates domestic Blockbuster Video stores didn't fare nearly as well as the release intimates and probably finished the quarter flat, if not down from what they were a year ago.

So read between the lines and what do we have? A money-losing chain struggling to stem the flow of red ink by cutting costs, including advertising. A chain whose stores are chock full of hits, a chain that prides itself on guaranteeing its customers will "go home happy," a chain that now controls nearly 40% of the video rental market--and yet a chain that can't seem to get people to spend more money in its stores if its life depended on it, even with the added lure of DirecTV.

Revenue-sharing, what hath thou wrought?

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

Add Comment