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Blockbuster in Dire Need of Makeover


Years of mismanagement, increased competition have ravaged the company.

Years of mismanagement, increased competition, and ill-conceived promotions have caught up to Blockbuster (BBI). On Tuesday, the company announced plans to close 810 to 960 underperforming locations -- an amount that doubles the previous aim of 410 to 450 stores -- in an effort to stave off the increasing likelihood of Chapter 11.

In addition the shuttered locations, the company said it may revamp 250 to 300 existing stores into used DVD outlets, bringing the total percentage of closed or altered Blockbuster locations to 24% to 29%.

The last few years have been rough for the once-great king of rental video. Netflix (NFLX) has ushered people away from the brick-and-mortar shops to the ease of online rental membership. And Redbox (CSTR) kiosks have been the popular choice for those who need a DVD title for a paltry $1/night fee.

Shares have fallen an astounding 95% since its all-time high of $30 in May 2002 and dipped to $0.22 -- its lowest point -- in March of this year. In keeping its ongoing annual losses in check, Blockbuster has curbed its marketing and in-store stock this year, according to the Los Angeles Times. And the chain estimates that each closed store will save $30 million in avoided losses.

But Michael Pachter -- an analyst at Wedbush Morgan Securities -- told the Times that for every closed location, there's an opportunity for Redbox to install a kiosk out front.

As business steadily transfers to Netflix and Redbox, Blockbuster is in dire need of some guidance. As a former employee of the company -- Floor Representative from March '97 to January '98 -- I feel qualified to provide some sound advice for a positive business makeover.

1. With Netflix's "Watch Instantly" feature, Blockbuster's immediate-viewing appeal is severely undercut. Equip each store with an array of TVs, shag carpeting, and beanbag chairs for a quick, cozy, and convenient viewing experience.

2. Some customers prefer Redbox kiosks for their faceless interaction. Train the staff to ignore customer questions, avoid eye contact during transactions, and vacate the premises when asked for a recommendation.

3. Blockbuster locations have been widely criticized for only carrying generic, mainstream titles. Find the Lithuanian equivalent to Confessions of a Shopaholic and promote the title as a Blockbuster exclusive.

4. A Staff Pick generally doesn't carry much weight if the employee is a 17-year-old neophyte. Enroll each employee in film school, bankroll their first three features, and book at least one Village Voice interview before they give an opinion on cinema.

5. Online piracy has curtailed the public's interest in paying for films. Guilt-trip potential pirates by uploading Blockbuster's entire library to BitTorrent sites with the message: "If you enjoyed this movie, please donate $19.99 to your local Blockbuster location."

6. Bring back VHS for a kitschy retro vibe.
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