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Blockbuster Closing 300 Stores in U.S.

21 Jan, 2013 By: Erik Gruenwedel

Blockbuster LLC is shuttering 300 stores, or about 35% of its locations in the United States, in the coming weeks due to expiring leases and underperformance, a Dish Network representative confirmed Jan. 21 to Home Media Magazine.

Dish, which acquired Blockbuster out of bankruptcy in April 2011, operated about 850 stores domestically at the end of the third quarter. It announced the closure of 500 stores in February 2012, leaving the company with about 1,000 locations at the time.

Scuttlebutt about the new Blockbuster store closures emerged online during the weekend due in part to store closures announced by Blockbuster U.K. Jan. 19. The U.K. operations, which filed for a British form of bankruptcy protection last week, are owned by Dish and run as a separate entity.

“We continue to see value in the Blockbuster brand, and we will continue to analyze store level profitability and — as we have in the past — close unprofitable stores,” Dish spokesperson John Hall wrote in an email.

Indeed, Dish founder Charlie Ergen has made no secret that Blockbuster might not be panning out as a home entertainment conduit to broaden distribution of the company’s flagship satellite TV service. Regardless, Ergen eyes Blockbuster as a break-even concern that could be a strategic beachhead should Dish enter the mobile broadband market. Dish recently put up an unsolicited $2.28 billion offer for wireless network Clearwire — trumping on paper a $2.2 billion bid from Sprint Nextel, which already owns 50% of Clearwire.

Meanwhile, Eric Wold, analyst with B. Riley & Co. in Los Angeles, said the Blockbuster store closings represent another win for Redbox. Specifically, Wold said the disc rental market was projected to reach $5.5 billion in 2012 – of which he believes Redbox accounted for $1.9 billion.

“As Blockbuster continues to close stores and Netflix focuses more on its streaming offering, I believe this will only benefit Redbox’s kiosk traffic,” Wold wrote in an email.

The analyst contends Redbox’s base of 40,000 kiosks will experience increased monetization from the market share gains, especially as it reduces the number of new kiosks installed annually.

“I do not believe the continued closure of Blockbuster stores is an indication of any lack of desire for DVDs, but just that consumers have embraced a more cost-effective and convenient method of renting the DVDs – the Redbox kiosk,” Wold said.

He said consumer attraction should multiple as Coinstar rolls out its Redbox Instant combination SVOD/DVD subscription service.

“I believe an increasing number of consumers will be attracted to the value offered at $8 per month,” Wold said.

About the Author: Erik Gruenwedel

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