Blockbuster Total Access

[orbitdvd]

Originally Posted by netflix_got_blockbusted

Awesome news: Blockbuster now has 2.2 Million Online subscribers, representing almost 50% growth in just the past 3 months. Blockbuster added a total of 700K subs in Q4, which is absolutely phenomenal and which will likely exceed Netflix's Q4 sub growth.

http://biz.yahoo.com/prnews/070103/nyw055.html?.v=81

Congratulations, guys. Blockbuster couldn't have done it without your excellent contributions.

Hehe. Now I know you work at the corporate office.


marc

[CapitalRadioTwo]

Originally Posted by orbitdvd

Hehe. Now I know you work at the corporate office.


marc

And if he doesn't, he knows an awful lot more than he should.

[netflix_got_blockbusted]

Originally Posted by orbitdvd

Hehe. Now I know you work at the corporate office. marc

Originally Posted by CapitalRadioTwo

And if he doesn't, he knows an awful lot more than he should.

Other than investing in BBI, I have no affiliation with Blockbuster. And unlike that dimwit Davis Freeberg, I've got much more than $1500 at stake (more like 175x that amount). Not sure why Freeberg spends so much time writing about Blockbuster given his chump-change stake in the sector.

http://www.ihateblockbuster.com/foru...398#post179398


The subscriber information that I posted is publicly available information. I take your comments as complements, however, so thank you both very much.

As an investor, I've made a few timely calls in the video rental space:
(1) I shorted Movie Gallery in the $29s back in mid-2005 (near its historic high). MOVI now trades at around $3. I continue to bet against MOVI and believe that the stock will go to $0, likely in early-2007.

http://messages.finance.yahoo.com/Bu...=7208&mid=7211


(2) I went long on Netflix in the $9s (near its historic low). Unfortunately, I sold in the teens. I'm currently betting against NFLX.

http://messages.finance.yahoo.com/St...6&tof=-1&off=1


I think that BBI remains significantly undervalued and will likely trade over $8 sometime this year. The main catalysts are:

(1) Hollywod Video's demise. As I've mentioned, as the in-store pie shrinks, Hollywood Video will be forced out of many of Blockbuster's markets. As Hollywood Videos close, some revenue (perhaps 25%) from these closed stores will be transferred to nearby Blockbuster stores. Even better, because of the operating leverage involved, Blockbuster will gain this revenue while incurring very little incremental cost. Also, as competing Hollywood Videos close, Blockbuster will inherit local monopolies, which should allow Blockbuster to reinstate Late Fees with no problem.

(2) Total Access gaining share at the expense of Netflix. While many stupid people have come to the conclusion that Total Access is a money-loser, the reality is that Total Access can easily be a big win:

(A) Speed Hollywood Video's demise.

(B) Generate significant postage savings. A 2-tiered price structure (A cheap plan for a Netflix-clone and a premium plan for Total Access) will allow Blockbuster to realize over $100MM of annual postage savings since Total Access customers will self-select store returns and allow Blockbuster to do away with prepaid envelopes.

(C) Cheaper store rentals will crowd out more expensive Online rentals. If you're watching a store-based rental, then this leaves less time to watch Online rentals. And the fewer Online rentals, the lower the postage costs for Blockbuster.

Also, just because you CAN rent 40 DVDs per month with Total Access doesn't mean that you WILL. The average Netflix subscriber rents between 6 and 7 DVDs per month, far less than the number that they COULD watch. Netflix's break-even point is probably around 11 DVDs per month (rent any more and Netflix loses money). Even if you assume that a Total Access subscriber rents double the # of DVDs as a Netflix subscriber, Blockbuster will still likely break-even at around 14/15 DVDs, since half of the rentals will be store-based and will not require mailing costs.

(D) Even if Blockbuster merely breaks even Online, it's still worth it, since Total Access should significantly increase store traffic, which will result in additional store-based revenue

Now, I haven't always been a fan of Blockbuster management (No Late Fees continues to be a disaster). But currently, they're doing many, many, many things right. Most imporantly, management seems to have finally realized that in-store and Online renting are COMPLEMENTS, not SUBSTITUTES.

Let me give you one example of management's newfound brilliance: The Netflix mailer promotion.

On the surface, this promotion was about marketing the benefits of Total Access to Netflix subscribers.

If you look deeper, however, this was a marketing masterstroke because it damages Netflix's ability to partner with Hollywood Video.

A Netflix/Hollywood Video partnership is possible but not probable. To mimic the benefits of Total Access, Hollywood Video could accept Netflix mailers in exchange for free/discounted in-store rentals. Netflix would clearly benefit. And Hollywood Video might also benefit, due to increased store traffic.

The partnership is unlikely, however, since a mailer could be saved and used even after Netflix membership were canceled. For example, I could subscribe to Netflix for 1 month, save a dozen mailers, cancel my membership, and then essentially get a free month of Hollywood Video due to my saved mailers.

Blockbuster doesn't have this problem since it requires DVDs to be exchanged, not mailers.

Importantly, the Netflix mailer promotion makes a Netflix/Hollywood partnership even less likely. Thousands of people who previously trashed their mailers are now starting to keep their mailers. Consequently, if a future Netflix/Hollywood Video partnership ever emerged, Hollywood would probably be faced with a bunch of consumers with perhaps 100s of saved envelopes. This would be a nightmare scenario for Hollywood Video.

Overall, I would love to work for Blockbuster's marketing group, as I think that Blockbuster is a great turnaround story given its substantial assets, dwindling competition, and the fact that most people have already written it off.

[HardcoreKeith]

You have awesome enthusiasm. For this I give you props.

[Morbid Angel]

Originally Posted by HardcoreKeith

You have awesome enthusiasm. For this I give you props.

I second that. I don't agree with everything he said, but it is rather refreshing to see someone who isn't entirely negative about the state of BBI. Corporate shill or not, he's clearly very intelligent and makes his case superbly.

[Lomithrandel]

I concur, please feel free to hang with us .

[orbitdvd]

I agree with pretty much everything you said. BBV stock is undervalued, Total Access was a good idea and Movie Gallery/Hollywood have not kept up with the times. However, have you looked at these points?


1. Other technologies. Last month cable got what it's been trying 20 years for: no home video window. Also downloading is officially underway. Since BBV is mainly a new release store, they are vunerable to pay for view and I have seen no game plan for a downloading service (you might know however). I believe that the early adopters of downloading will be at the expense of the mail order companies like BBO and Netflix.

2. Adjusting. Total Access will bring in more people for sure. However, will they be prepared for it? Will there be more staffing, less time in lines and more product on the shelf? None of this happened after The End of Late Fees and as you know their stock plummeted. BBV is on shaky ground with vendors right now so will they be willing to hand over more product?

3. In store losses. Take a customer that rents $40 a month. Pretty good number, perhaps a family that comes in once a week. Bump them down to $20 or whatever the price is for BBO. Multiply that times 100 people per store then 4000 stores then 12 months. Ouch. Will Wall Street see the long term benefits of Total Access or the losses of cash flow? If history repeats like EOLF they might punish them again.

4. The "A" factor. Honesty I don't know how Antioco survives the board. He's still there and is great for my business but has not been so great for Blockbuster. New blood would help.


With all this being said, I too am probably going to purchase BBV stock. Is $8 your sell price?


marc

[BlockbusterLuvsU]

They can't fire Antioco because he would take $50 million in severancepay with him. I'd like to know what genius thought that would be a good idea. It was more than likely his idea, and the board said "sure Johnny, whatever you say!"

Orbit, as far as the people paying $40 in the store becoming online customers, those people will probably sometimes pay for additional rentals when they swap in their mailers.

The real heavy renters are used to spending more, so spending a little extra outside of the online subscription is no big deal.

I see this all the time, even with Netflix customers. Many of whom are idiots BTW for not signing up for the two free weeks of Total Access.

[Skand]

I had canceled my Blockbuster Total Access plan. The next day the sent me an email telling me to sign up for free. Uhm, okay.

[HardcoreKeith]

I was getting all upset because I had sent back two movies and they never sent me any more.

Then I went into my account, and saw that I must have downgraded myself to 1 at a time and forgot about it. Sure enough, this month they only charged me $10.

Amazing how I can operate a motorcycle, run a store, score a 1380 on the SAT, but still do stupid shit like this