The Trials and Tribulations of Blockbuster

21 Apr, 2008 By: Erik Gruenwedel

Unlike Wall Street, which considers Blockbuster Inc. an overstated 1980s relic whose relevance has been usurped by Netflix, digital distribution and sellthrough, I still like the rental giant.

But Blockbuster's latest moves are more head-scratch inducing than the last M. Night Shyamalan movie.

The company continues to generate millions in revenue (and occasional profit) despite questionable strategies and ongoing efforts by electronic distribution and some studios (Warner Bros.) to silence DVD rental.

Former Time Warner CEO Richard Parsons couldn't have been more succinct when he said it would be a “cold day in hell” before he visited a video store.

That made me want to renew my Blockbuster card.

But when online rental pioneer Netflix deftly created DVD-by-mail, Blockbuster responded with all-you-can-eat Total Access and ad spending (see Jessica Simpson and the Super Bowl) only a lunatic would greenlight. Consumers responded — Blockbuster suddenly had 3 million subscribers. But at a cost. Blockbuster had spent money like it was printing C-notes, and former CEO John Antioco appeared to be burning the candle at both ends — or was it dynamite?

Then the board came to its senses and new CEO Jim Keyes promised a return to normalcy, saying the video store — not online — would again be the epicenter of packaged media. He should know. Keyes once convinced consumers to pay airport prices for produce at 7-Eleven.

Keyes did pull a coup last week announcing plans to bow in-store displays with partner studios eager to jump-start Blu-ray. Then came scuttlebutt Blockbuster was contemplating a proprietary set-top box. And now it wants to buy troubled Circuit City for nearly $1.4 billion.

Keyes should remember that Blockbuster once considered spending that much to outbid Movie Gallery for Hollywood Video. A quick call to Joe Malugen, CEO of bankrupt Gallery, would no doubt set him straight.

Keyes also ought to know that Apple TV, Vudu, Akimbo TV and MovieBeam are just the latest unsuccessful attempts to distribute entertainment from the Internet to the TV via $200 boxes.

Another set-top box? Oh, thank heaven. Maybe Blockbuster could next deliver video via the Slurpee machine.