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Like a video store version of The Little Engine That Could (which was also blue, come to think of it) Blockbuster keeps on keepin’ on despite massive debt and dwindling market share.
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Fast Company recently interviewed CEO Jim Keyes and got his take on BB’s “remodeling” plans, its rivalry with Redbox and Netflix, and the company’s intention to avoid bankruptcy. Here are some highlights:

Keyes on Blockbuster’s efforts to turn its fortunes around through multiple distribution channels.
“How does [our multi-channel platform] not work? Look, we are completely rebuilding house from scratch, and we’re living in the house! You might think, This looks terrible! Well, yes, no kidding! We’re in the middle of remodeling. But what we’re modeling is a house with a garden, and a studio, and a media room–and I’m out there saying, Listen, wait until we finish, but this is going to be really unique. It’s different than the other house–why wouldn’t you want to live here?

Call me brash, but we’re building a world-class cross-channel distribution platform. Netflix can’t deliver content the way we can. Redbox can’t do what we do in their vending machines.”

Keyes on Blockbuster’s 28-day new release window advantage over Netflix and Redbox.
“How often does a company get a material, tangible point of differentiation? If 60% of the demand for movies is in the first 28 days, and we now are the only national chain able to offer this advantage by mail, online, and in-store–look, it’s a very compelling advantage for mainstream customers. Not for Netflix’s customer, who is that longer-tail customer. If you want Avatar, you are not going to get it on Netflix in a timely basis. I don’t at all mean to poke any negatives at Netflix. I think they do a terrific job–at what they do.

Keyes on Blockbuster’s intention to avoid bankruptcy.
“[Going bankrupt] is not our intention. Our objective is to manage a very challenging liquidity environment. We’re doing a lot of things at the same time, and we have to spend a lot of money to build our future. What we couldn’t have anticipated was a complete financial meltdown in 2009.”

Keyes (sort of) admitting that customer attrition also contributed to BB’s downfall, along with the recession.
“Yes, of course we did [lose some customers to Netflix]. We lost some to Redbox too. We were sitting on 45% of the market.
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Anyone with that much market share is vulnerable to new competitors. But people forget we’re still sitting on a base of 50 to 60 million customers.”

(via Fast Company)

18 Responses to “Blockbuster CEO: We’re in the Middle of a Remodeling”

  1. Visitor [Join Now]
    Farva [visitor]

    Delusions of grandeur.

  2. Visitor [Join Now]
    firstlawofnature [visitor]

    ‘If 60% of the demand for movies is in the first 28 days…’

    No thought that the delay will wreck havoc with these assumptions. I bet a year from now it’ll be lower than 60%.

    • Visitor [Join Now]
      shutthef@@@up [visitor]

      i’ll bet a year from now you’ll still be single sitting on your computer in your basement at your moms house getting fat making comments on this website day after day after day!!

      • Member [Join Now]
        Mikey K [mikey-k]

        Says the guy that is constantly flaming him on this message board. Grow up sir. If you have anything respectful and intelligent to say, please do.

  3. Visitor [Join Now]
    Brad [visitor]

    When the dust settles after the Blockbuster implosion, the only thing left standing will be the bluebox (Blockbuster Express), which will probably be acquired by Redbox to take on Netflix and the emerging VOD market.

  4. Visitor [Join Now]
    John Small [visitor]

    FTR, July 1 may be a big day for BBI. We will see if the can dodge another bullet.

    In addition, apparently the kiosk deal with NCR has to date paid out exactly $0.00 to BBI.

    Chapter 11 is just around the corner.

  5. Visitor [Join Now]
    Firstlawofnature [visitor]

    So let’s see your facts and numbers showing how redbox was less profitable in Q1 year over year. You’re just glossing over the facts as always.

    • Visitor [Join Now]
      John Small [visitor]

      Again, the numbers are simple. They are in the Coinstar Quarterly results. Compare the 2 Quarters, divide by the number of machines, get your result.

      Of course you have to apply ALL of the expenses or you will get numbers like you got.

      If you do the math, it shows, quite clearly, that the profit per kiosk is lower on a YOY basis.

    • Visitor [Join Now]
      Firstlawofnature [visitor]

      So you took gross net income as reported for all divisions after charges and interest expense and divided by average # of kiosks?

      • Visitor [Join Now]
        John Small [visitor]

        Of course not. You have to interpret things from a segmental perspective. Having said that, if you include ALL of the costs instead of the way you tried to do it then you will get the correct numbers and see the real results.

        Hopefully it will open your eyes when you figure it all out. I’d hate for you to lose your money with thie company.

        You’ll have to pardon me for not responding this weekend. Weather is looking good and the missus wants to take the boat out so I doubt I’ll have time for your witty repartee. Retirement does have it’s privileges though.

      • Visitor [Join Now]
        firstlawofnature [visitor]

        Man you can’t help but to obfuscate things can you. Like the Michael said you simply refuse to answer direct questions. You are using words that give the appearance that you know what you are talking about but cannot support your ‘facts’ with any analysis using numbers.

        ‘The bottom line is that the net income for Coinstar is not increasing at a rate commensurate with the kiosk expansion level.’

        There is no segment net income given there is only segment revenue and EBITDA. Since they also give segment deprecation one can calculate segment operating income. There is no way to take coinstar net income and draw the conclusion that you did about redbox. Can’t be done. Impossible. And this is still before considering that the coin segment contribution was lower, interest expense was higher and there were some one-time write-offs all of which affect net income. You still refuse to give the actual numbers to back up your original claim.

        You sir are an artful dodger. Enjoy the boat.

        • Visitor [Join Now]
          therealtruth [visitor]

          i’ll answer for him….
          their debt situation is reason enough not to like them. But adding in their distribution agreements and the fact that two of their primary income streams (redbox and coinstar) lack sustainability and the rest (the fact that most of the movies they rent suck) is just icing on the cake.
          By my numbers approximatley 0.64/share per quarter will be going to debt service between now and the end of 2012 – by 2012 will there still be a redbox given the increasing movement toward streaming as well as the decreasing likelihood of lower and middle class consumerism returning to pre-2007 levels – if it starts looking bad who will refinance their $225MM revolver?

          will the company be able to sucessfully raise prices along with adding blu-ray and games? i don’t know, but i’m not optimistic.

          and how could I possibly forget that over the last 3 weeks 10 of their executives and board members converted and sold longterm option grants.

          Anyway firstlawofnature you intentionally mislead people on this board. The case John Small makes stands the test of truth alot more then the deceiving numbers you portray on this board. You yourself likd to use big words but you never really say anything!

        • Visitor [Join Now]
          firstlawofnature [visitor]

          Since coinstar is going to do almost $300mm in EBITDA this year refinancing the revolver after a few more years of growth shouldn’t be a problem. The convert is essentially equity at this price so that shouldn’t be a problem either. Coinstar also my generate $150mm to $200mm in free cash over the next 2 years in addition to the $100mm they have in the bank now. If you are forecasting a collapse in earnings/revenue then yes it will difficult to refinance anything.

          I agree they will not be able to raise prices much if at all. Getting more than their fare share for blu-ray seems likely though. Insider selling is always a concern but that being said it is light thus far and the CEO has sold very little. As I pointed out before the CEO of Netflix has been selling shares for years from $15 to $120. That fact hasn’t been a red flag thus far.

          ‘The case John Small makes stands the test of truth alot more then the deceiving numbers you portray on this board.’

          JS hasn’t made his case yet. I await any use of actual numbers by him to show Q1 was worse for redbox year over year. If you would point out how my specific numbers are deceiving I will address your concerns.