Blockbuster Losing Fight with Netflix

Blockbuster (BBI) has been getting crushed and dominated by Netflix (NFLX). In the last year alone, Blockbuster is down over 50% while Netflix has risen 47%. They both offer movie subscriptions at just about the same but their stocks are heading in different directions. At last count, Netflix held a lead with a bit over 8 million total subscribers to Blockbuster online’s 3 million total subscribers. If you think Blockbuster is oversold and deserves to be bought at the current $3.25 value, then think again because Blockbuster is just trying to stay afloat.

They even came out with their Total Access program that allows users to rent movies online and bring them into stores to exchange for a free rental. On paper, the Total Access program sounds like a really good idea but when factoring the costs to keep the Blockbuster stores open and that people are just using Blockbuster stores as exchange locations rather than a place to pay for movie rentals, this seems like a losing formula for Blockbuster.

Signs that Blockbuster won’t keep up with Netflix:

  1. I tried out their Total Access a couple years ago, got a free month trial and canceled shortly thereafter because Netflix had superior shipping times to my location and had more availability of movies. Just recently I received an e-mail from Blockbuster asking me to rejoin the Total Access program (one movie at a time) and I would receive one month free of charge. If Blockbuster is trying to attract new customers and bring back old customers by offering them free movies, something must be going sour.
  2. A local Blockbuster just recently shut down and was situated next to Bristol Farms, Baskin Robbins, a US post office, and luxury apartments that houses many young professionals and UCSD students. The location is not a terrible location and has plenty of foot traffic that goes through, but when you can’t sell a product, you have to shut down regardless of the territory.
  3. With a slowing economy and higher gas prices, customers will be less willing to drive far distances (remember you have to drive to get the movie and then return it) to exchange a movie at Blockbuster. Cutbacks will also need to be made in people’s spending habits, and if people don’t care about the Total Access program, their 1, 2, and 3 movie at a time plans are identical in price to Netflix.
  4. Netflix has a library of over 90,000 movie titles and claims that 95% of their subscribers are in locations that are able to receive movies within one business day.
  5. I remember just a couple years ago when I had the Total Access program, I had to return new releases within 2 days, but now they’re allowing new releases to go 5 days. Blockbuster doesn’t even have leverage on new releases anymore.

Don’t even try to get onto the Blockbuster ship because it’s not currently sinking, it has already sunk.

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3 Responses to Blockbuster Losing Fight with Netflix

  1. bumscientist says:

    Blockbuster is coming out with a set top box to stream movies directly to your HDTV.

  2. haystackfarmer says:

    Looks like those guys at Blockbuster are really “thinking outside the box”

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