For years, market analysts have been predicting the demise of Blockbuster Inc. But like the death-cheating teens from the slasher franchise Final Destination, the world’s biggest video-rental chain keeps going to sequel.
A four-pronged attack from mail-order giant Netflix Inc., Internet downloads, video-on-demand cable services, and DVD kiosks offering rentals as cheap as $1 a night has eroded Blockbuster’s revenues and collapsed its share value—which, last year declined by more than half to around US$3. In an ugly three-year run ending in 2005, the Dallasbased company—which has lost money in 10 of the past 11 years—racked up total losses of more than US$4 billion.
But last week Blockbuster announced that, thanks to cost cuts, improvements to store merchandising and new pricing on its by-mail service, it had quadrupled its fourth-quarter net income and predicted a return to profitability in 2008 with earnings of as much as US$25 million expected for the year.
In 2004, the wounded giant dropped its
late fees and, three years ago, launched the Total Access by-mail service, whose fourthquarter revenues rose 7.4 per cent over 2007In August, new CEO Jim Keyes engineered the purchase of struggling Movielink, a download service that will allow Blockbuster to deliver rentals directly to PCs, which looks to be an essential cog in Blockbuster’s rebuilding plan.
“There’s still life in movie-rental stores,” says Keyes. But the competition keeps increasing too. Two months ago, Apple elbowed into the U.S. market, offering rentals on its heavily trafficked iTunes store. Fewer and fewer consumers are willing to venture out to rent a flick. But Blockbuster may yet find a way to reach its customers in their own homes. M
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