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Blockbuster CEO Jim Keyes just did an interview with Rick Munarriz over at the Motley Fool, and boy did he come out looking like a fool with some of his comments.

First off, let me say that I have nothing against Keyes or Blockbuster in general. If they can come up with a competitive play that benefits me as a customer, I would give them some of my business, as I have in the past. But, whether they can remains to be seen.

Now, on to the interview and the quote that I think shows just how out of touch Keyes and Blockbuster is on the current competitive environment.

The quote from Keyes:

“Neither RedBox nor Netflix are even on the radar screen in terms of competition,” he said. “It’s more Wal-Mart and Apple.”

My question is: Jim, what are you smoking?

While I am certain Wal-mart and Apple pose threats to Blockbuster, to ignore actual DVD rental companies like Redbox and Netflix as competitors is foolish at best, and delusional at worst.

So, what is going on here? Perhaps Jim is trying to ensure shareholders that Blockbuster is still one of the “big boys”, so only huge corporations (like Wal-mart and Apple) can even be considered as competition. Or, perhaps he sees DVD sales and digital downloads as the real threat, not other companies in the DVD rental space. While I think he is right about those threats, they certainly aren’t the only ones Blockbuster is facing.

Some of the comments on the Motley Fool article show a different tune than the one Keyes is singing, too…

Funny stuff… Here in Denver, one of the most profitable and busy Blockbuster stores in the entire region … just closed its doors. …if Blockbuster wants its grove back, it needs to completely re-visit its pricing strategy.

Blockbuster is going out of business…

I agree with most of the other comments. DVD’s may be a slowly melting glacier, but in-store DVD rental is melting a whole lot faster than DVD rentals as a whole. To dismiss Neflix [and Redbox] as serious competition is delusional…

Check out the article to see the growing list of comments.

Other parts of the interview show that Keyes thinks the future is “in-store digital downloads”. So, he wants people to come back to his stores to put their little memory card in his kiosk and download their movies, then go back home to watch them. Isn’t there an extra step in their somewhere?

Really, if non-streaming digital movies is coming to kiosks, isn’t more likely that Redbox – with over 11,000 locations and growing – would be a better choice? How many of you have a Blockbuster store closer to you than a Redbox? I think I know the answer, as I have to pass by at least 5 Redbox kiosks to get to my nearest Blockbuster store, which is only 2 miles away.
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So what is the point of this post? If Blockbuster execs really think like Keyes has spoken here, I think many investors are about to jump off Blockbuster’s Titanic before it’s too late.
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What do you think?

14 Responses to “Blockbuster CEO: Redbox, Netflix “Not On Radar Screen” as Competition”

  1. Visitor [Join Now]
    The Turnip [visitor]

    I think you nailed it; Keyes is blowing smoke to keep his stockholders from spooking. I suppose that’s a part of his job to some degree.

    However, if Netflix is not on the radar, why did BB try to emulate their DVD-by-mail model right down to the pricing structure (at first)? Why is BB playing the “me too” game by introducing a set-top box for streaming like NF? Why is BB experimenting with kiosks (or at least studying them)? I think Netflix and Redbox are not only on the radar, Blockbuster considers them to be their Research and Development Department.

    The closest BB to my house closed early last month. It was at the same intersection where Redbox kiosks are available at a grocery store and a McDonalds. I don’t know if Redbox drove them out of business but it makes me wonder if it was a factor. Perhaps it closed simply because there is a second BB exactly one mile away, but they had co-existed for over 12 years. What happened? Where did the business go that had sustained both locations for so long?

    To get to the remaining BB, I pass three Redbox locations.

  2. Visitor [Join Now]
    Davis Freeberg [visitor]

    I would take Keyes comments with a grain of salt. Undoubtably Blockbuster views Redbox and Netflix as competition, but what he’s trying to do is to redefine how people/investors think about Blockbuster. His point is merely that just because video stores are going out of business doesn’t mean that Blockbuster can’t reinvent itself as another type of store. Whether they actually can or not is open up for debate, but by reframing how people view Blockbuster he’s hoping that people will focus on their strengths instead of their competitive weakness. In other words, if you compare Blockbuster to Netflix/Redbox, they’ll lose everytime, but if you compare them to Circuit City (who’s in bankruptcy) Blockbuster isn’t doing half bad ;) It’s a little bit of misdirection on his part, but by changing the tone of the conversation, he’s likely hoping it will put an end to the Blockbuster is dying articles that keep coming out.

    I’m not convinced that the memory card downloads are going to work (in fact I think they’ll be a massive flop), but would point out that Redbox does not have a competitive advantage here because their 11,000 locations don’t include the technology. Their next 11,000 kiosks could end up having their own memory stick downloads, but it’d be awfully expensive to retrofit their current kiosks with the technology. I’d also point out that Redbox’s tenuous relationship with the movie studios would make it much more difficult to license a download kiosk solution vs. their current fair use arrangement to rent DVDs over and over again.

  3. Visitor [Join Now]
    jon [visitor]

    complete and utter hogwash.

    i can see no other reason for BB to begin offering $0.99 movie rentals.
    we have a redbox at our albertsons next door to the blockbuster, and it trumps BB every time.

    i cancelled my BB after they raised prices to become active on Netflix.

    wow. i surely hope shareholders aren’t that stupid.


  4. Member [Join Now]

    It’s one thing for Keyes to say “We’re not worried about Netflix and Redbox” as competition, but to say they’re not on your radar is extremely naive and makes you sound like a liar, or at least trying to cover up the fact that you really are concerned.

    The simple fact of the matter is that no video rental companies can compete with Redbox in regards to price, ease of use, and customer service. This is a self-serve society we live in, and Redbox was tailor made for it. My only hope is that they continue to grow and appear in more and more locations, eventually taking a huge bite out of Blockbuster’s profits.

  5. Visitor [Join Now]
    bloodylipstick [visitor]

    the ONLY thing that blockbuster has over redbox is that they have (some) older releases in addition to new releases but even that is going out the window. the closest BB to my house keeps shipping out older movies to make room for video games. most of the classics aren’t even available anymore. they are self righteous to think that people would buy their overpriced new dvds instead of going to wal-mart or somewhere else that sells them for much less. i’ve seen stuff for sale at BB for 22.99 that is in the 2 for 10 bin at walmart. no one in their right mind would shop or rent from BB unless a redbox or another store (for purchasing dvds) wasn’t available.

  6. Visitor [Join Now]
    steve [visitor]

    I went to blockbuster the other night for a blockbuster exclusive movie i really wanted to see. Do you realize i paid over 5.00 for one movie!!! Somehow the movie wasn,t as enjoyable as it would have been for 1 dollar!!Somehow 5.00 kept popping in my head!! BB you get my point!!!!!!

  7. Member [Join Now]

    I have not visted an Blockbuster in over 2 years. I used to go there to rent games (X-Box & Wii). But they have even priced themselves out of that market too.

    As per Keyes’ discussion on the Motley Fool, as of right now, it sucks to be a Blcokbuster shareholder !

  8. Visitor [Join Now]
    Dave Perkins [visitor]

    I think you’re right as well, I have a Redbox only a few miles away, and there’s no Blockbuster close to me

  9. Visitor [Join Now]
    Movietime [visitor]

    Let Movietime jump in” there’s a Blockbuster and a Giant right next door of one another and Giant has a Redbox inside and the lines are as long at the Redbox kioaks as it is in the grocery lines. By the way I haven’t seen a line in Blockbusters in a while. So there you have it straight from movietime herself.
    As Movietime would say “movietime is on.

  10. Member [Join Now]

    Blockbuster had better be worried about Redbox because Redbox is awesome. In fact, redbox could easily do some financial damage to them and a few others.

    BTW, I hate Blockbuster… always have and probably always will.

    I guess Hasting’s will continue to get my video game rental business. That is until RB gets into that also… that would be awesome.

  11. Visitor [Join Now]
    JACK [visitor]

    The only real question is whether Redbox is making money. Otherwise, absolutely it’s model is better in many key ways than BB. But if it isn’t making money? Then you are banking on McDonald’s continuing to want to fund it as a loss leader for their stores.

  12. Visitor [Join Now]
    Scott [visitor]

    the only problem i have with this is redbox is a competetor they are on the radar and are going to pretty much take over the rental business. but when i have rented and many people i know have rented from redbox if u don’t check ur emails frequently they charge u rediculous amoiunts of money in late fees that u never were late on. I returned the movie the very nextday and still got charged like $15 instead of the $1 that is a huge difference and they said there was no way to get my money back.

  13. Member [Join Now]

    Redbox can afford to charge $1.00 per DVD because it doesn’t have to pay employees on an hourly basis to handle every order and its overhead is practically nothing. It’s all automated and this is something Blockbuster should seriously consider. I heard that Blockbuster is thinking of selling Ticketmaster tickets at all of its locations. This would a big score for them if it went through.

  14. Member [Join Now]

    Maybe Redbox should consider offering Video Game rentals next. That would give BB some major competition!