In the wake of yesterday’s revealing regulatory filing from Blockbuster that hinted at possible bankruptcy, several industry analysts have voiced their opinions on the issue. John Kraft with D.A. Davidson & Co. feels that a bankrupt Blockbuster would drive traffic to Redbox kiosks, while Needham analyst Charles Wolf thinks that a new story in BB history could begin with Chapter 11.
A Boost to Redbox?
Kraft believes that should Blockbuster enter bankruptcy, it would be compelled to close even more retail locations. Such a move, combined with the massive closures of Movie Gallery and Hollywood Video stores, would inexorably push consumers to Redbox kiosks. Said Kraft:
“We believe Redbox has an opportunity for significant market share gains at the expense of the brick-and-mortar players,”
Bankruptcy a Boon for BB?
Needham analyst Wolf is of the opinion that Blockbuster will be unable to get out from under a crushing debt load of nearly $1 billion without filing for Chapter 11 protection. A slimmed, restructured post-bankruptcy company more focused on the by-mail and on-demand sectors would be a positive scenario, in the analyst’s opinion. Said Wolf:
“A voluntary [filing] would enable Blockbuster to reduce its debt burden and interest payments to manageable levels and [allow it] to implement its strategy for closing underperforming stores and building a digital distribution business . . . I can see why management is contemplating it.”
Your turn to sound off, Insiders. Are these analysts correct in their assessments? Is there any hope for a post-bankruptcy Blockbuster? Will Redbox reap extra business from the bankruptcy of its blue rival? Would the demise or massive downsizing of a major Redbox competitor be in the best interest of the video renting consumer?
(via Home Media Magazine)
Redbox will see increased rentals due to stores closing, yes.
Blockbuster will benefit from a bankruptcy in the short term, but over the long term, it will remain in trouble and will eventually close all brick & mortar locations to focus on its kiosk and streaming businesses. It is already selling of its european stores, and they are having issues securing bank loans to keep them afloat now, think of how a bankruptcy will only hurt them when it comes to getting more loans needed, and what private company in their right mind would step in and partner up with BB? Their best option is to close their physical stores and go full force into the kiosk business. The only reason they don’t? They can’t get into most major retailers because Redbox & Coinstar beat them to the good ones. None of the locations with Redboxs will boot redbox out for blockbuster, because then they would lose their coinstar machines too. If you are a retailer, would you really consider giving up a sucessful redbox and a successful coinstar in return for a less than popular blockbuster kiosk? Blockbuster would have to sweeten the pot with four or five times the commission being paid to the stores in order for the stores to consider giving up two high revenue generating kiosks.
So in the end, Blockbuster will most likely fail in the brick & mortar business, they will profit somewhat in the kiosk business, but never overtake redbox, and they will probably do okay in the streaming business, but again they won’t overtake netflix. Maybe in the end, redbox buys blockbuster’s kiosk business and netflix or microsoft or amazon.com buys the blockbuster mailorder & streaming business.
NCR owns Blockbuster’s kiosk business, they just license the name, sharing a percentage of the revenue. Unless BB uses bankruptcy to break thier contract with NCR to create thier own kiosk business, they would need to focus on thier online business to be competitive… or start carrying porn. Every video store around me has closed except the small one with very few new releases, but 75% of the store is in the adults-only section.
isn’t BB trying to find buyers for big chunks of their stores? Although I can’t imagine any investor would sink huge amounts of cash into buying Blockbuster stores….
BB will file for ch 11. it is guaranteed. but they will not go out of business.
they will restructure eliminating the debt and close a number of stored with reduced rent payments. they will keep the online service against netflix intact and work with ncr to expand bb express.
you will see.
I feel BB is headed toward kiosks, I use them all the time in Florida because I can reserve online and use a promo code. When will redbox allow this?