Thursday, March 18, 2010

Blockbuster Bankrupt?

A classic case of a company not changing to stay profitable in a changing environment. "Movie rental chain Blockbuster Inc. said in a Securities and Exchange Commission filing that it may have to file for Chapter 11 bankruptcy protection if unable to generate enough cash flow to meet or restructure its debt commitments." Beaten on the rental side and sales side too. As other companies underpriced them, Blockbuster became a follower and not a leader. Reacting not acting. And so they lost market share to Netflix with unlimited rentals, to Redbox with cheaper rentals. Blockbuster even lost on the gaming front, allowing companies like Game Stop to come in with new and used games. It seems Blockbuster had the edge but lost the vision.

Because Blockbuster is a brick and mortar business, it is not in their best interest to compete with mail order or VOD. Instead, they must figure out how to bring customers BACK into their stores. For video, it is lower prices and no penalties. They need to aggressively enter the gaming fray and offer competition immediately to Game Stop. And they must push a game rental component, to rent before you buy, as an added inducement to join them. Kids love downloads and offer opportunities by bringing your handheld into the store to download characters or games, simply for coming in. Heck, once in the store, you have a greater chance of getting a sale.

Blockbuster must change its model and adapt to changing times; else, this bankruptcy will be a Chapter 7, not a Chapter 13.

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