Lackluster Performance Means 500 Less Blockbuster Stores by End of Q2 - The UpStream

Lackluster Performance Means 500 Less Blockbuster Stores by End of Q2

posted Sunday Feb 26, 2012 by Jon Wurm

Lackluster Performance Means 500 Less Blockbuster Stores by End of Q2

Blockbuster has found itself in a precarious position since September 2010 when they filed for Chapter 11 bankruptcy after previously closing 1000 stores and putting together some failed distribution deals with movie studios. Even after Dish Network came along and potentially saved the day by winning Blockbuster Video's auction last April, Blockbuster can't seem to find it's way out of the horror section. The 1500 locations that survived the Dish Network cutbacks last July are experiencing another round of closings.

In 2011 Blockbuster made $975 million in revenues and retained a positive net income figure of $4 million, which is impressive given all the massive changes the company has undergone. The addition of the Blockbuster Movie Streaming service is starting to make some progress with regards to their churn rate for the service. The churn lowered from 1.76 in 2010 to 1.63 in 2011, which means they are holding on to more new subscribers. In January 2012 Blockbuster had 6,000 new programs added to their 125,000 titles, 25,000 of which are available online, thanks to a deal with Univision. This helps prove that what CEO Joe Clayton said about Dish being committed to making this work is true.

By introducing new Blockbuster-branded services, we've begun to turn the tide in subscriber losses while continuing to face increased competitive pressures. The Blockbuster brand is a significant brand in the marketplace, which focuses on family and movies. And that's clearly what Dish is all about.

Why is Dish continuing to close locations even though the service is making some headway? Find out after the break.

It appears that after trimming off some fat last July there is still some dead weight to get rid of. With 500 of the remaining 1500 locations getting the ax by the end of Q2 this year, Dish isn't trying to make finding Blockbuster locations as difficult as finding a unicorn, they are re-positioning themselves to better leverage their pay-TV business. According to Clayton,

We have been very clear from the beginning that we would take action when necessary. The vast majority of these stores have flexible termination provisions. Now our goal is to reach a steady-state store count so that we can leverage with our current pay-TV business and our future wireless enterprise similar to the way that we've incorporated Blockbuster at homes by mail and streaming services into our pay-TV business.

It's a good thing their locations have flexible provisions as it will make breaking up with unprofitable locations and difficult landlords who are unwilling to negotiate on new leases a little easier. Do you think Blockbuster will pull through 2012 with the increasing competition from services like Hulu, Netflix and YouTube?

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