Tag: BBI

When you compare Netflix’s (NFLX) recent results to those of Blockbuster (BBI), you can only shake your head.

Netflix said Wednesday that its fourth-quarter profit rose 6% as subscribers increased. Net income was $15.8 million, or 24 cents a share for the quarter ended Dec. 31, compared with a profit of $14.9 million, or 21 cents a share a year earlier. Revenue rose to $302.4 million from $277.2 million, an increase of 9%. Subscriber acquisition costs in the quarter were $34.60 per gross add, down from $37.91 in the third quarter.

Analysts were expecting a profit of 14 cents a share on revenue of $301.7 million. Subscribers rose to 7.48 million from 6.32 million a year earlier.

On the conference call CEO Reed Hasting said, “For 2008, we expect to have more net adds than 2007, with a positive factor being less aggressive competition from Blockbuster Online ….”

He continued “Blockbuster Online is still active and still has several million subscribers. While they appear to have shifted to valuing profit over growth, they can change their mind again at any time. We are widening the gap between us however, and any further attack is unlikely to be as painful as their 2005 or 2007 thrusts.”

Even he does not expect Blockbuster to get its act together online for the next year

Since December 2005 the subscriber base has grown by 79% to 7.5 million subscribers., revenue has grown by 77% to $1.2 billion and they have nearly doubled free cash flow to $46 million.

It would appear based on ALL evidence to date Netflix took Blockbusters best shot (twice) and has come out the clear victor. Now it is on the the online game. Hastings did say that they are seeing good business from their younger subscribers in downloads and should in 2008, have the downloads ready for the Mac, high-definition DVD players, to game consoles and to dedicated Internet set-top boxes broadening the audience further.

A note: Not once in the entire call did they once mention “getting into the video store game”. The reason? It is over…

As a matter of fact, Hastings actually said “Unless video stores are reinvented, it may be that in five years, there are tens of thousands of kiosks, millions of online DVD renters and very few video stores.”

I have been saying this since last summer, get rid of the stores Blockbuster!!

Disclosure (“none” means no position): None

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There was a very interesting omission in the coverage of Netflix’s (NFLX) decision to allows most users to stream unlimited internet content. The omission? The word Blockbuster (BBI).

Under the most popular plan that charges $16.99 per month to rent up to three DVDs at a time, Netflix customers can currently watch as many as 17 hours of entertainment each month on the streaming service, dubbed “Watch Instantly.” Now, all but the $4.99 a month plan subscribers will be able to stream as many movies and TV shows as they want from a library containing more than 6,000 titles. There will be no additional charge for the unlimited access.

What word has replaced Blockbuster? Apple (AAPL). This is both very good news for NetFlix and very bad news for Blockbuster. Apple will be offering 24 hour downloads for $3.99.

This will cause the fees Netflix pays to Hollywood and for bandwidth to jump obviously, but it should also mean fewer DVDs sent in the mail, which would lower some logistical costs and postage.

Blockbuster has been pushed to virtual oblivion as they are still toying with the download service and stuck trying to figure out how to get people to go to stores in conjunction with a download. Am I the only one who just does not get this? Isn’t the very reason to do one so that you do not have to do the other?

While, the competition is taking it to the next level now, Blockbuster is still in the starting blocks..

Disclosure: None

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Rangell, WSJ, Erin Burnett, Blockbuster

– Ole’ Charlie is doing his best to ruin the economy…

– Always an honor to be mentioned here.

– Hey Erin, who cares?

– You all know my thoughts on Blockbuster, so, “now for something completely different”
–
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Blockbuster (BBI) is in the midst of a standing eight count in its fight against NetFlix (NFLX)

The site Compete.com has a chart that shows what I am talking about.

Now, Blockbuster earlier in the year was gunning for NetFlix in the online game. Less than a month ago, I noted new CEO Jim Keyes was “still considering ways to build up a digital distribution channel for films. Proposals include merging its Blockbuster.com Internet site for ordering films by mail with its Movielink download service, and partnering with telecom and cable companies.”

Still considering? What is he waiting for? As far back as August they finally got the ball rolling here and yet despite the chart above, they are still dragging their heals and actually talking about “remodeling the stores” in some bizarre Apple (APPL) induced concept. Note to Keyes: It works for Apple because they are, well, Apple, people cannot get enough of their products. Your Blockbuster, when folks think of you they think, “are they still around?”.

The oddest thing? Back in July when former CEO John Antioco was fired Keyes said “as the technology continues to evolve it will be my job to have Blockbuster front and center as a player in those areas of technology”.

Okay… any day now. In case you did not realize, you are rapidly becoming irrelevant.

Back in July I said “If nothing else, he cannot screw things up there any more than they are now. For under $5 a share, it just might be worth taking a gander. I want to see what Keyes will do, I want to see more that 290 stores closed this year. Double it and I become a buyer.”

I would like to correct that now. Apparently Keyes can and has outdone his predecessor. Not with a 10 foot pole would I touch this one now. With shares down 40% since then, I guess most folks feel the same way.

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Note to executives at Blockbuster (BBI): PEOPLE DO NOT WANT TO GO TO THE VIDEO STORE ANYMORE!!

Hasn’t the butt whipping they have received from NetFlix (NFLX) the past few years convinced them of that yet?

Blockbuster said on Thursday it was testing pricing for its rental formats and will experiment with store layouts to add downloading stations, books or beverages in a bid to shore up its customer base. CEO Jim Keyes said “Are we raising prices? No, as of today, what I don’t want to do is raise them three or four times.” The ideas mentioned for its new retail format include an interactive area in stores for children, a destination for downloading entertainment to portable media devices or a kiosk for Sony Corp’s (SNE) PlayStation 3 game console.

Then something was said that was incredible. Keys noted the retail success of Apple Inc (AAPL), which has a far smaller store base and sells its iPod digital media players, iPhone mobile phones and personal computers. “I get excited about what we could do with what is some of the most choice real estate,” Keyes said. Yeah, how about selling it and reinvest that money into the online operations!! The fact that Keyes even mentions his company and Apple in the same sentence illustrate a certain lack of grasp on reality.

Keyes said the company is still considering ways to build up a digital distribution channel for films. Proposals include merging its Blockbuster.com Internet site for ordering films by mail with its Movielink download service, and partnering with telecom and cable companies. This ought to be the sole focus of the company right now. This is the future, not a revamped “old way”. Any money being plowed back into the stores is just wasted. Stop trying to reinvent the wooden wheel and and admit the rubber ones are the one folks want.

Keyes also said that the change would not be “an overnight success”. Translation? More dismal performance for shareholders.

I think this is in part why shares are down 11% Thursday and are almost cheaper than a rental.

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Blockbuster (BBI) managed to do it, under-perform dismal expectations.

Revenues of $1.24 billion (down 2% from Q2, down 5.7% y/y) and a $.20 per share loss (same as Q2, 5 cents worse than last year) were both worse than estimates. If that was not bad enough, the company’s “Total Access” program, the presumed savior of it, actually lost 500,000 subs in the latest quarter. What happened? In September they essentially ruined the advantage of the service by limiting the video trade-ins to 5 per month, and began charging more for the unlimited trade-ins. Any wonder people walked? Blockbuster is now actually trying to jettison “unprofitable” subscribers. Who are they talking about, those who actually use the service regularly? Have they been talking to execs at Sprint (S)?

Any good news? Sure. Online download increased 15%. But the problem here is again too little too late. Blockbuster did not begin to enter the online download game until around June and that put them 6 months behind their nemesis, Netflix (NFLX).

Blockbuster did close 526 stores in the last year and those still open saw sales essentially flat and while that may seem good, when you consider they are basically the only brick and mortar video store left, that is not good news. Again, I have been saying this since early August, just close them. Put the money you spend on the stores into more profitable ventures. Think of the labor savings alone!

Blockbuster is losing members from its program and it seems from Netflix’s latest earnings that they are going directly there. Why? NetFlix has a few easy to use options and when they change the program, it benefits users, it does not restrict their use of the program.

Blockbuster just cannot seem to accept the direction their industry has gone in and for shareholders, that is unfortunate.

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