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What Happens Without Blockbuster?

4 Mar, 2011 By: Stephanie Prange

Last week a representative from the United States Trustee Program — a branch of the Justice Department — filed a motion saying Blockbuster doesn’t have the funds to bankroll its fiscal reorganization and should therefore liquidate under Chapter 7.

The industry already went through a liquidation with then-second-ranked rental chain Movie Gallery. Whether Blockbuster would survive in any form is in doubt.

That begs the question: What will the home entertainment business look like without a big, publicly traded video rental chain?

Perhaps independent video rental chains and stores — unburdened by the kind of debt that drew Blockbuster into financial trouble — might be able to stage a comeback, renting former Blockbuster locations on the cheap. Coming on the heels of Borders’ bankruptcy and store closings, a Blockbuster liquidation would lower rents.

Kiosk leader Redbox might be able to raise prices and get a better deal from studios that think their business model devalues content. Netflix, too, might be able to raise prices for physical rental to boost its streaming business.

As for the studios, they lose the biggest brick-and-mortar-store chain ally in keeping rental prices higher than Redbox and Netflix. Thus, the studios might opt to throw much more support behind the next-highest-priced rental product, cable and Internet transactional video-on-demand. The studios also might accelerate the high-priced rentals afforded by premium VOD shortly after a movie hits theaters.

Still, for consumers, it will mean less immediate access to a breadth of physical disc rentals that they have heretofore had. A Redbox kiosk can hold only so many titles.

My mother recently commented that she wanted to see The King’s Speech, but it is no longer playing theatrically in her area of Texas. Theatrically, the limiting of title selection to first-run movies has been long-standing. Unfortunately, that means consumers who want to see arthouse-type fare may lose their chance if they don’t act quickly after a film is released. They must wait for the home video release.

With Blockbuster’s exit from the store rental business, consumers may have to wait even longer to find the titles they want — unless they want to pay a premium to see the content on VOD in the home. Whether this is good or bad for the overall home entertainment business’ bottom line remains to be seen.