Listen to these two statements about Blockbuster video in the US and see if you think they are mutually exclusive. First Blockbuster plans to resell existing traditional VoD services for local cable companies with in-store promotions. Secondly the Wall Street Journal says Blockbuster may have to close as many as 1,560 of its stores, because it is being ruthless about only keeping open profitable stores. The combined assault of Netflix and Redbox with online DVD rentals and DVD kiosks, is making more and more of its stores unprofitable.
Let’s rephrase the two statements this way. We are going to make more money out of the fact that we have lots of stores. We are going to have less stores. You get the picture. And in fact running Blockbuster is not a pretty picture to get.
The announcement of the cable MSO deals, with Suddenlink and Mediacom, both claiming top ten status among the US cable operators with Suddenlink having 1.3 million subscribers and Mediacom with 1.5 million customers.
The deal is two-fold. In the first instance Blockbuster will use its retail footprint to sell the existing VoD services of the cable operators by rebranding them with the ‘Blockbuster’ name and selling subs in its stores using in-store kiosks and in-store promotion.
The second part of the deal is the one that in the long term appears to make it interesting for Blockbuster, it will slide access to its own online movie rental service in alongside that of the cable operators via their VoD supplier Avail-TVN.
This will actually include all the different channels that Blockbuster has to offer, its online DVD rental which competes with Netflix; its DVD vending services, which are expecting to surge hugely as it opens up to 10,000 rental kiosks by the middle of next year and finally its ‘digital channels’ which we take to mean online film rental.
So how we reconcile those two earlier statements is that Blockbuster may be reducing its store footprint, but it will increase its Kiosk footprint so its retail reach will not reduce. And Blockbuster clearly has to shift as much traffic to its over the top online movie purchase, and the deal facilitates this. What is critical is whether or not these are just two one-off deals, or whether Blockbuster retains the brand strength to persuade other MSOs to also consider this formula.