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Blockbuster Blames the Red Menace

By :Stephanie Prange | Posted: 24 Feb 2010

Blockbuster CEO Jim Keyes is seeing red — as in Redbox kiosks — in his explanation for the chain’s continuing woes.

Redbox, that wily competitor, has successfully been working around the windows imposed on it by Warner, Fox and Universal, he said in a conference call, and that’s why Blockbuster posted continued negative same-store rentals in the fourth quarter.

But now that Warner has struck a month-long window deal with the Red Menace, Keyes hopes Fox and Universal (both embroiled in lawsuits with the kiosk company) will do the same. That could give the chain an edge and prevent further store closures in the future, he said. Also, the closure of Movie Gallery and Hollwood Video stores could prove a boon for the company, he added.

“We remain cautiously optimistic ... with tailwinds becoming clear,” Keyes said.

Heck, Blockbuster couldn’t ask for a better hand of cards dealt it in recent months. The studios are forging later windows for competitors Netflix and Redbox. The only other big rental chain still kicking, Movie Gallery, has filed bankruptcy for the second time in three years. And yet nothing seems to move the needle much on Blockbuster’s fortunes.

There may come a time when blaming the Red Menace and other competition won’t hold water — when the real menace, Blockbuster’s crushing debt, mostly inherited when it spun off from Viacom years ago, will bite back with a crushing blow. Just before the chain’s financial results hit the wires, Blockbuster reportedly hired legal and financial experts to help it to restructure nearly $1 billion in debt. That debt has been the real villain in Blockbuster’s struggles. It prevented the chain from quickly modernizing, advertising and innovating in ways that could have held off the likes of Redbox, Netflix and others. The Red Menace may be the cause du jour of Blockbuster’s troubles, but it’s the debt that may eventually do it in.

Related Story :

Blockbuster Hires Financial Advisors, Talking With Movie Gallery
Blockbuster CEO: More Store Closures Without Increased Studio Window Support


User comments

Commented by Jim
Posted on 2010-02-25 08:29:17

Stephanie, Stephanie, Stephanie, You just don't get it. Even without problems of "crushing debt" Red Box is taking this entire industry over the abyss and quickly. That means your job also Stephanie. Jim Keyes words hopefully are on the desks over every studio exec this morning. Make no mistake about it. Without the 28 day windows fix quick, it will be over quick. If anything, Keyes understated his the prediciment of all bricks and mortar retailers. Honest Stephanie, that's the way it is. Picture a world where only two significant rental channels exist, NetFlix and Redbox. Really Stephanie, think about that.

Commented by Gerry Weber
Posted on 2010-02-25 10:29:37

Viacom sucked the life out of Blockbuster. Blockbuster should be synonymous with entertainment no matter the delivery medium. Prior to Viacom's acquisition Blockbuster was well on its way to becoming a diversified entertainment company. With assets such as Spelling Television, Republic Pictures, Virgin, New Leaf, etc. Blockbuster was poised to stay on the cutting edge of technological advances. Viacom used Blockbuster's cash flow to buy Paramount and CBS and then set it adrift with a mountain of debt. The undoing of a fabulous brand.


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