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Blockbuster Loses Its Only Advantage
December 17, 2010 01:31 PM
28 DAYS LAMER
Travis Coates is tearfully raising the shotgun. Rose DeWitt Bukater is letting go. Selma Jezkova is giving her final performance. Randy "The Ram" Robinson is climbing the turnbuckle. And George is asking Lenny to think of the pretty rabbits one last time.
There may have been a gurgle of life in the last month for this literal penny stock, but the outlook is still pretty grim for Blockbuster.
After being severely trounced by Netflix, Redbox, and scores of on-demand cable boxes and media players, Blockbuster finally succumbed to Chapter 11 in September. Shuttering stores left and right and scrambling to reorganize, the retailer is at a loss both financially and strategically to compete with its younger competitors. And now, its one advantage that CEO James Keyes has
touted for months
just slipped through its fingers.
According to Fast Company
, Blockbuster can no longer brag about its exclusive 28-day window for all its new releases. NCR, the operator of Blockbuster's rental kiosks under the licensed name, has agreed to new deals with Warner Bros, 20th Century Fox, and Universal Studios that will prevent the units from getting new-release rentals the day they hit store shelves. Along with Netflix and Redbox, Blockbuster Express will be waiting 28 days.
Combined, the three studios make up nearly half of the rental house's offerings.
The new deals will lower acquisition costs, saving the ailing company a big chunk of change. Keyes had bragged about the month-long head start, making it seem like the cost was well worth it. However, one source told Fast Company that Blockbuster didn't have much choice in the matter.
"Blockbuster didn't stay with new releases by choice," the source said. "Movie studios have Blockbuster where they want them -- they know Blockbuster is not in any position to negotiate because of their financial position. The studios are getting huge payments for new releases from Blockbuster because they know the company needs them."
Keyes had said in interviews that Blockbuster was a company that relied on timely new releases. Netflix, on the other hand, actually opted for the 28-day delay given the cheaper deals.
"We actually went proactively to the studios several years ago because the 28-day model is really good for us -- we recommended it," explained Steve Swasey, VP of corporate communications for Netflix. "We're even talking to other studios about it."
So while Blockbuster can still offer some new releases through its stores, it appears its
multimillion-dollar comeback ad campaign
will have to be scrapped. Or amended with a pretty weighty asterisk.
Ah, well. It's not like we don't have options.
No positions in stocks mentioned.
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