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Antioco Touts Used Movies and Games

10 Jan, 2005 By: Holly J. Wagner

Despite scattered predictions that video rental may rebound this year as late adopters feed their new DVD players, Blockbuster Video CEO John Antioco acknowledged Monday that rental is a shrinking business and trading is the future.

“The profit is in used movies and games. … Our thrust will be used movies and used games,” Antioco said. “As you know, the game specialty retailers make a significant portion of their margins on used movies and games, and that is the business we are going after.”

Blockbuster has about 4 percent of the extremely competitive new-disc sellthrough market, Antioco said, adding,” It is a tough business for us to compete with mass merchants.”

Blockbuster will spend about $180 million on its three new initiatives — trading, games and subscriptions — this year, while reducing costs in other areas, Antioco said.

“Why are we doing all this stuff? … Because it completely repositions Blockbuster from being in a business that has slow or no growth to being in a business with significant growth potential.”

Blockbuster's subscription business is on track with executives' expectations, Antioco said, closing out 2004 with about 8 percent of customers on subscriptions.

The recent cut that took Blockbuster Online's subscription fee from $17.49 to $14.99 a month will reduce subscriber acquisition costs, Antioco said, helping the company gain share in a market that conservative estimates put at 6 million to 7 million potential subscribers.

Blockbuster feeds the online rental business from 23 distribution centers, 13 of which were added since the service launched. Antioco said the company still plans to use stores for distribution, but said no decision has been made as to whether to “fully integrate” the online and in-store subscriptions with a single price for both.

Games are also a crucial part of the company's strategy, he said.

“Before 2004, we were in the game-rental business only; 2004 put us into game retail and trading,” he said. “We learned from Movie Trading Company that there is significant profit potential for trading. [It was] in about 2,500 stores at the end of 2004, and we will add about 2,000 more stores by year-end 2005. We intend to be in game and movie trading in every store we can be in.”

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