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Blockbuster's Fate, Though Unfortunate, Appears Sealed

3 Aug, 2010 By: Thomas K. Arnold

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I caught quite a bit of flack over an article last week in The Wrap that quoted me as saying Blockbuster would likely follow Movie Gallery down the path to extinction.

"I'm really surprised you went on the record with that," one studio president emailed me.

The passage from The Wrap story--headlined, "How Much Longer Can Blockbuster Hold On?"--that apparently raised quite a few eyebrows in home entertainment circles:

"The question is not if Blockbuster will fold, but when. The Dallas-based movie rental chain has struggled mightily against upstarts Redbox and Netflix, but Wall Street is openly predicting that the home entertainment veteran is headed to the movie palace in the sky. Blockbuster recently made a list of brands that analysts think will vanish by the end of 2011.... 'I see Blockbuster following Movie Gallery into bankruptcy within two or three years,' Thomas K. Arnold, publisher of Home Media Magazine, told The Wrap. 'They've done some smart things and [Blockbuster CEO] Jim Keyes is a smart guy, but sometime you just can't win. Everything they do, somebody else does better.'

I don't really understand why my comments were seen as so controversial. I merely said what many an analyst had said before me, and quite honestly I don't see how anyone could come to a different conclusion.

Blockbuster, even if viewed through rose-colored glasses, is in deep doo-doo.

Granted, my published quote was a bit terse. The author of the story began by asking if the exclusive 28-day window Blockbuster and other brick-and-mortar rental retailers now enjoy from Warner, Fox and Universal would at long last put the beleaguered chain into recovery mode.

Too little, too late, I asserted. Heck, Blockbuster couldn't even afford to properly market its new exclusive. The chain should have been all over TV, radio, magazines and the Internet with ads touting the availability of hot new releases a full month before Netflix and Redbox. The only plausible reason for not putting on the blitz: a lack of money to do so.

And that's a sorry predicament to be in, I told The Wrap. Blockbuster is effectively too weak to grab the life ring, a life ring tossed it by the studios whose only reason to want to save Blockbuster from drowning is to weaken the iron grip Netflix and Redbox appear to have on the renting public.

I really don't want to see Blockbuster go away, I added. Unlike Movie Gallery, which did practically everything wrong, Blockbuster did virtually everything right, I said. Movie Gallery was doomed by its unwillingness to change; Blockbuster, on the other hand, has consistently changed its business model, venturing into satellite TV, mail-order rentals and even kiosks.

You can't accuse Blockbuster of failing to keep up with the Joneses. Blockbuster's fatal flaw, if you will, is its very brand, which in the eyes of the public is synonymous with an antiquated way of bringing movies into the home. 

This perception may be wrong, but it is a perception, nonetheless--and we all know that in this business, perception is reality.

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