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Ma & Pa
November 1st, 2006, 09:58 AM
Blockbuster's Brazen Bet
By Rick Aristotle Munarriz (TMFBreakerRick)
November 1, 2006

In a move that may sound as brilliant as it is desperate, Blockbuster (NYSE: BBI) is now allowing its online customers the ability to walk into their nearest store and exchange a rented DVD for another title.

Blockbuster's Total Access program goes further than that. Dropping off a DVD at a physical store will also help expedite the exchange process. Netflix (Nasdaq: NFLX) has always prided itself on its speedy turnaround time, with the ability to provide overnight delivery through its network of regional distribution centers, but it's ultimately a two-day process. Drop a red Netflix mailer into the mail, and it takes the post office one day to send back your film. Then you have to wait another day for your next selection to arrive after Netflix confirms the receipt of your return. Total Access shaves the process in half by shipping out the next title in your queue the moment that it is processed at the local store.

With 1.5 million subscribers, Blockbuster is a bit player compared to the 5.7 million celluloid buffs that Netflix is presently serving. The differences don't end there. Netflix is cash-rich and consistently profitable, while Blockbuster is saddled with debt and has posted a loss in four of the last six quarters. Netflix is growing, while Blockbuster has seen its top line dip last year, and thus far in 2006 as well.

Odd paths to get even
With its creditors antsy, the bold move by Blockbuster to fortify its online endeavors is surprising. Instead of improving its stores and drumming up the value of its traditional in-store presence, Blockbuster continues to devalue its bricks-and-mortar core. Between last year's "No Late Fees" angle and its new positioning of its stores as a place for speedier online transactions and a clearinghouse for free rentals, Blockbuster keeps nudging its client base out toward Blockbuster.com.

As part of Total Access, Blockbuster is now even letting its customer base sign up for the online service inside the actual stores. Even if you're not exactly dot-com proficient, how can you refuse the dirt cheap smorgasbord of home-delivered flicks and free in-store exchanges over the more conventional way to rent at Blockbuster? The company may not be browbeating you to become an online subscriber, but you're going to start looking pretty dumb if you don't take Blockbuster up on that offer.

If the plan works, it's not as if golden riches await Blockbuster. Netflix is leaner, nimbler, and even at a higher price point, it's not exactly toiling away in margin nirvana. The key, for Blockbuster, will be its ability to milk more out of increased traffic at its stores as the online subscribers crawl out of their homes to redeem their online freebies. It has to be more than just trying to sell them on Raisinets or microwavable popcorn.

Does Blockbuster know what it's getting itself into here? Its new approach is aimed at appealing to the more hyperactive renters at Netflix, and that's an audience Netflix will gladly hand over. Despite the perceived nature of "unlimited" rentals, there comes a point where Netflix begins losing money on individual subscribers. Between the revenue-sharing royalties for the studios, round-trip postage, and other fulfillment costs, if you find yourself going through 10-12 movies a month -- or more -- under the company's most popular plan, you are probably a fiscal detriment to Netflix.

Hyperactive users who find their accounts throttled or shipments delayed may feel that they are exacting revenge by leaving Netflix, but by and large, they're usually doing it a favor. Does Blockbuster really want to run with that crowd? The freebie-redeeming crowd may come in with holes in their pockets.

The point of no return
Blockbuster can't go back. It may not want to. The conventional model is broken. Movie Gallery hasn't quite been the same since it acquired the Hollywood Video chain. Blockbuster's stores have too small a footprint to emulate a more successful model like Hastings (Nasdaq: HAST), which can rent flicks but also serve as a consumer electronics retailer, and the world doesn't really need another RadioShack (NYSE: RSH).

This places Blockbuster in a dangerous game of Frogger, where it's parked on the middle strip -- between the fast-moving traffic behind it and the perilously submerged flow of crocs, logs, and lily pads before it -- as the clock ticks expensively.

If Blockbuster were braced with the tools to win this battle, I would be applauding like a madman. As it stands, Blockbuster's site is not optimized with third-party ads to monetize any uptick in Web traffic. The in-store makeover that would make giving away free films a viable business also seems absent.

Total Access just smells like Total Desperation. A more logical move would have been to simply differentiate its online service from Netflix by providing video game rentals by mail, like Gamefly, to its online accounts, or to take advantage of its local presence to create some form of social interactive marketing.

Instead, Blockbuster's new plan is likely to only attract the audience that Netflix no longer wants, and convert the offline customers that its physical stores desperately need to stay put.

It's a sad thing to see, and I'm not even a Blockbuster creditor.

Ma & Pa:p

zooworker
November 1st, 2006, 04:37 PM
Yawn................

rk237
November 1st, 2006, 04:51 PM
Gripping.
:rolleyes:

DraconianSM
November 1st, 2006, 04:59 PM
The writer doesn't seem to get the point of what Blockbuster is doing. Yes the hyperactive renters cost more to serve, but the point of Blockbuster Online/ Total Access is to bury NetFlix. It won't just be the hyperactive renters switching to Blockbuster Online.

Morbid Angel
November 1st, 2006, 05:10 PM
The writer doesn't seem to get the point of what Blockbuster is doing. Yes the hyperactive renters cost more to serve, but the point of Blockbuster Online/ Total Access is to bury NetFlix. It won't just be the hyperactive renters switching to Blockbuster Online.

BBO Total Access may very well bury Netflix. Infact if it doesn't, it's unlikely anything Blockbuster does will ever put the hurt on Netflix.

But what happens after Netflix is dead and buried though? Does Blockbuster just keep throwing it's customers free rentals like it's trick or treat candy? At what point do they say "Ok, that's enough of that. We can't keep letting our customers take advantage of us because we needed to give Netflix a good ass kicking. It's time to start making a profit again and try to stay in business for the long run."???

One thing Total Access has going for it is that it's going to simply overload the average renter and prevent them from 'abusing' it. Assuming BBO does infact mail out the customers' next discs in their queue as soon as we scan in the ones they currently have out, their next 3 BBO rentals are going to be in their mail box before they even finish watching the 3 in-store rentals they have checked out!

sar94pga
November 1st, 2006, 05:59 PM
oh goodie. another thread to spam!

yousickf'ingbastard
November 1st, 2006, 06:12 PM
marine will lure himself to his thread and bring his nonsense in it like he does in every thread

rk237
November 1st, 2006, 06:19 PM
marine will lure himself to his thread and bring his nonsense in it like he does in every thread

...
Who??? :D

yousickf'ingbastard
November 1st, 2006, 06:31 PM
...
Who??? :D

I would say marine but my half a mind thinks its a trick :D

zooworker
November 1st, 2006, 06:50 PM
I would say marine but my half a mind thinks its a trick :D
Which half?:rolleyes:

rk237
November 1st, 2006, 06:55 PM
Which half?:rolleyes:

The 2/4 that thinks it's a trick.

zooworker
November 1st, 2006, 06:56 PM
The 2/4 that thinks it's a trick.
I'd say its more like 4/8 of a lie

sar94pga
November 1st, 2006, 08:52 PM
I'd say its more like 4/8 of a lie

i only like the fractions 1/16th of the time....

zooworker
November 1st, 2006, 09:00 PM
i only like the fractions 1/16th of the time....
are we really going to go there again ? Last time it only lasted about 5/32 of an hour.

sar94pga
November 1st, 2006, 09:20 PM
are we really going to go there again ? Last time it only lasted about 5/32 of an hour.

i know, i know, but, i 100% can not stop myself...

zooworker
November 1st, 2006, 09:25 PM
i know, i know, but, i 100% can not stop myself...
Try reducing yourself to 86%, might work better.

SL_600
November 2nd, 2006, 12:32 AM
Why do 90% of the threads end up being spammed? :rolleyes:

BBVTyrant
November 2nd, 2006, 03:32 AM
I have used both Online Services and despite having Distribution Centers in my home state, and in the same city as each other, Netflix's turnaround is quicker by 1-2 days from when I had BBOnline.

Now, not withstanding my hatred of Blockbuster, I am still one of those customers that finds it inconvenient to go to the stores ... one of the original concepts for the startup of Online Renting. And the bulk of online subscribers can be fit into this description. Therefore, it will be interesting to see if Total Access has any impact whatsoever on the industry. My business sense is that it will not.

Knowing Blockbuster, once this concept does not produce the results they are looking for, they'll probably start handing out self-addressed stamped envelopes for the online customers to mail the in-store rentals back to their home stores. Keep digging that hole of debt deeper and deeper.

Aphrodite
November 2nd, 2006, 04:34 AM
OMG The fraction thing is soooo fucking old/lame/both :rolleyes:

You should be spending your energies flaming Ma&Pa the dickhead instead.

*wishes for the hundreth time that ASM was still on the board* :(

ripGRUSH
November 2nd, 2006, 05:45 AM
well total access will either be the nail in the coffin for netflix or blockbuster, but which one is the true question?

rk237
November 2nd, 2006, 05:58 AM
OMG The fraction thing is soooo fucking old/lame/both :rolleyes:

You should be spending your energies flaming Ma&Pa the dickhead instead.

*wishes for the hundreth time that ASM was still on the board* :(

Come on Aph, you got to admit it was hilarious this time.

Aphrodite
November 2nd, 2006, 06:53 AM
..about as hilarious as a dog pissing on my shoes while Im wearing them :rolleyes:

I.E. Not at ALL hilarious ;)

Adornedatom
November 2nd, 2006, 08:37 AM
..about as hilarious as a dog pissing on my shoes while Im wearing them :rolleyes:

I.E. Not at ALL hilarious ;) Oh I dunno, personally I think that would be damn funny.:D

So would you after Jeremy Beadle's Grandson offered you £500 for the video.;)

Aphrodite
November 2nd, 2006, 08:51 AM
Maybe from YOUR perspective :p


Dog piss on my shoe and foot isnt even worth £500. :eek:

Maybe for £5000 though :p

Maybe we should make a new poll - 'How much cash would you need to let a dog piss on your foot?' - Damn, Im going to make it right now :D

OzMan
November 2nd, 2006, 10:13 PM
well total access will either be the nail in the coffin for netflix or blockbuster, but which one is the true question?

Perhaps both.

I saw a couple Motley Fool articles on this yesterday, but haven't had the time to post them here. One basically said Netflix is in MUCH better shape than BBOnline, and thus BOTH of them could be damaged here.