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BBI breaking out, eom.
Timing Is Everything! :oD
Investor in Dallas-based Blockbuster threatens fight for board seat
Blockbuster Inc. shareholder Gregory Meyer is giving the struggling video rental company one last chance to name him voluntarily to the board of directors.
If Blockbuster doesn't accept the offer in writing by today, Meyer said in a Securities and Exchange Commission filing late last week, he will launch a full-scale election campaign for a seat.
"As a shareholder, I'm presenting them with an opportunity to move forward in a very amicable way, a very fair way," Meyer said in an interview Monday.
As part of the proposal, Meyer said he will pay all of the expenses he has incurred up until now in seeking the board seat.
He declined to specify how much he has spent, but said an all-out proxy contest could be cripplingly expensive for Blockbuster.
"The expense for a company for proxy contests can easily run into the millions of dollars," he said. "For a company in Blockbuster's position, where it's very capital-constrained, it's extremely important for the company to preserve its capital."
Blockbuster said in a brief statement that it stands behind its current board members.
But Meyer, who founded DVD kiosk company DVDXpress, said the board has failed.
"The board has not acted in the best interest of shareholders," he said. "The stock is down 95 percent over the last three years. There's been an enormous destruction of shareholder value. Enough is enough.
"This is a company that has missed two billion-dollar-plus opportunities over the last 10 years, first with Netflix and then with Redbox."
Meyer, 38, sold DVDXpress in 2007 to Coinstar Inc., which merged it with Redbox in 2009.
Meyer owns 620,000 shares of Blockbuster's Class A stock.
Shares of Blockbuster gained a penny Monday to close at 39 cents.
Meyer said in his filing that he's confident he has enough shareholder votes to win election to the board at the company's June 24 annual meeting, but doesn't want to force Blockbuster to spend the money on the contest.
He said he doesn't think the entire board and management team needs to be replaced.
"I don't think it's necessary at this time," he said.
Although Blockbuster's sales have shrunk the last few years, and the losses and debt and store closures have piled up, Meyer said the company should eventually hit a level where surviving stores are profitable.
"The company still generates more revenue than any of its competitors," Meyer said.
Blockbuster had sales of $4.06 billion last year, down from $5.06 billion in 2008.
But he noted that Blockbuster's recent success in securing exclusive 28-day video rental windows for new-release movies from Fox, Sony and Warner Bros. is a big advantage on which the company has to turn a profit.
"To be honest, a management team that wasn't able to turn that initiative into a profitable situation would not be worth their salt," Meyer said.
Blockbuster will release its first-quarter financial results Thursday.
Source: http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-blockbuster_11bus.ART.State.Edition1.4048f2e.html
Fredman has an Ihub subscription now! Gotta love the "Fredman" keyword Ihub search capability! ;oD
Deal, just do a quick pick at EXACTLY 11:19:28 am est on Thursday. ;oD
Powerball is next on my list. There is a mathematical formula for everything!!! ;oP
Thanks CiscoTrader!!!!!! :oD
Sharing truly is caring. Thanks fellow Ihubbers! I will for sure pass the IHUB spirit forward.
- Fredman & Family
Note To Self: I am "DA MAN!"
:oP
I am famous now, check out the top of the screen headline:
"Fredman posts the 50 millionth post on iHub!!"
LOL
A free Ihub subscription would be mint! ;oD
BBI is an easy double from here, imo.
BBI Q1 Earnings Call this Thursday 4:30pm est, glty!
When I posted it, my browser froze, blank screen but I saw message_id=50000000 in the address bar and I knew I had got it!
:oD
HAHAHA Wow!
Now my mailbox is gonna get floooooooooooooded!
Thanks IHUBBERS!!! ;oD
If this is not post # 50 million, it is pretty close to it!!!!
:oD
- Fredman
Gallery Demise Positive for Blockbuster — For Now
While Movie Gallery’s pending closure bodes ill for the brick-and-mortar video store, Blockbuster Inc. in the near term is better equipped to weather the challenging retail landscape, said Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles.
Dallas-based Blockbuster, which reports first-quarter (ended April 4) results May 13 after the market closes, is expected to generate about $938 million in revenue and earnings per share of 12 cents, according to Pachter.
“Blockbuster is better positioned than Gallery due to its superior store footprint, better brand name recognition and status as the only major brick-and-mortar company left,” Pachter wrote in a note.
Source: http://www.homemediamagazine.com/blockbuster/analyst-gallery-demise-positive-blockbuster--now-19341
There have been many stories in the news about how the number of Red Box locations has surpassed the number of Blockbuster locations. Does this mean that Red Box will take over the DVD rental market and become the dominate player? More than likely not due to several things working in blockbusters favor.
The first is the addition of Blockbuster video online to its offerings of products. It is a DVD rental club that allows its users several different monthly rental plans. Several of the plans offer unlimited DVD rentals. Now comparing this to Red Box, you have to pay every time for a DVD rental. For some consumer this just doesn’t make sense because their movie renting addiction far exceeds the cost using Red Box and are better off going with a monthly plan for a flat fee.
The second is that Blockbuster video online offers options that were not available to consumers when Red Box was just starting. The first is in-store exchanges. This is something Blockbuster has on their other online competition as well. An in-store exchange has two important points of competition for Redbox. The first is the fact the convenience of Redbox was it gave the consumer the ability to find movies several different locations for just a dollar. With Blockbuster video online consumers have the option of a flat fee for all the rentals they would like, which often is less than a dollar a movie, but still have the convenience of a local location to exchange a movie. The second is the completely visible locations of Blockbusters in their home town. To find a Redbox can be difficult without using the internet or knowing where they are already.
The third is the selection that Blockbuster video online offers. Redbox is somewhat limited to the number of titles offered. There are usually newer movies and boxes can often be sold out of a specific movie. American consumers have always wanted more selection and Blockbuster video online boasts over 80,000 titles in their library. Selection is important because at any one given time no consumer wants to see every movie in a Redbox and might be limited to only a handful of those available. Given an extensive library a consumers will be able to find several hundred movies they will definitely want to see. Furthermore, a genre like classics might never be available through Redbox because of the focus on the latest DVD rentals on the market.
Now, this isn’t to say that Redbox will go out of business or has a poor business model. They have there place in society. Blockbuster video online is just offering far more options with some of same convenience of Redbox.
Source: http://merle.bluerob.com/2010/05/10/blockbuster-video-online-versus-redbox/
Blockbuster’s Keys to Success
Founder of DVDXpress urges Blockbuster to leverage its advantages to compete more favorably with Netflix and RedBox.
An article last week at BNET.com speculated as to Blockbuster’s future and whether it can survive in a world evolving to mobile devices and online streaming of movies and TV shows.
Saddled with nearly $1 billion in debit, Blockbuster’s brick-and-mortar infrastructure is dragging the company down “in an industry that’s growing more virtual every minute,” writes the news source, adding that at least one Blockbuster shareholder has a plan that could turn the company’s fortunes around.
Gregory Meyer, founder of DVDXpress, which he sold to Coinstar in 2007 (and has since merged with RedBox), maintains that Blockbuster can regain control of the movie rental business by making all of its movies accessible via digital media — online, iPad, and console streaming — while bringing its DVD and BlueRay rental costs in line with those charged by Netflix and Redbox.
The article points out that Blockbuster is the only movie retailer to offer new movies the day that they are released as a particular strength for the company, in contrast to Netflix and Redbox, which both have to wait 28 days before releasing movies.
Blockbuster currently operates 7,000 stores worldwide, though it plans to close at least 500 by the end of this year while introducing 10,000 DVD kiosks.
Meyer maintains that remaining stores should sharply curtail their hours, and that the company should sell many of its assets.
Blockbuster can also point optimistically to the closure of Movie Gallery and Hollywood Video, two of its largest competitors. As such, it remains the main brick-and-mortar movie rental company, another strength that when coupled with competitive pricing, could allow the company to regain market share.
Source: http://www.nacsonline.com/NACS/News/Daily/Pages/ND0510102.aspx
FCC waiver could boost homevid biz
Ruling gives studios room to experiment
The FCC's decision last week granting studios a waiver to deliver firstrun movies directly to consumers' televisions can be considered a victory for Hollywood's efforts to revive the struggling homevideo business.
The decision means studios are now free to experiment with new revenue streams without fear of piracy -- including the ability to offer movies at home at the same time that they're playing in theaters.
DVD sales are still taking a dive -- even rentals are showing signs of slowing despite recent hits like "Avatar," the "Twilight" franchise and "The Blind Side," which have helped prop up the biz. DVD and Blu-ray sales were down 11% during the first three months of the year, while rentals fell 14%, according to trade org the Digital Entertainment Group.
That has studios working feverishly to embrace new methods of delivering films directly to audiences at home.
Studios have yet to unveil an official blueprint of what the new effort is going to look like, but digital, in all
its forms, is clearly going to play a major role, especially as more consumers turn to video-on-demand through their cable boxes, computers, vidgame consoles and, soon, their cell phones and mobile devices like the iPad.
With a greenlight from the FCC, members of the Motion Pictures Assn. of American will be able to deploy "selectable output control" antipiracy technology that prevents consumers from copying movies delivered to households.
"This limited waiver will provide public-interest benefits -- making movies widely available for home viewing far earlier than ever before -- without imposing harm on any consumers," the FCC said in its ruling.
Technically, the FCC ruling enables studios to use the technology for 90 days, or until the movie is released on DVD or Blu-ray. The "selectable output control" technology blocks consumers from recording the movie while it's being shown on the TV set.
Studios have been hinting for some time that they would offer day-and-date offerings of movies at home during their theatrical runs at prices steeper than those of movie tickets.
But studios couldn't move too aggressively on digital distribution until now; they needed to be sure that any movies offered would be protected from illegal copying and distribution -- which have significantly hurt the music industry.
"We deeply appreciate the recognition by the FCC that recently released movies need special protection against content theft when they are distributed to home televisions," said Bob Pisano, prexy and interim CEO of the MPAA. He called the FCC action "a major step forward in the development of new business models by the motion picture industry to respond to growing consumer demand."
Hollywood has been slowly inching closer to bringing firstrun movies into homes. Studios teamed up with cable operators in March to spend $30 million on a campaign that encourages consumers' to rent more movies via set-top boxes.
The effort, dubbed "The Video Store Just Moved In," pushes a revamped Movies on Demand service with a new green logo.
Campaign was introduced as more studios are making movies available on VOD the same day as their DVD releases.
The reason: the ability to generate higher profit margins by charging more for cable-based VOD rentals (around $5.99 per pic) if they're available day-and-date, versus the $1 rentals that companies like Redbox charge. Studios can charge even more for high-definition movies.
They've been encouraged by VOD's growth, with the DEG reporting that digital distribution, including download purchases and VOD, rose 27% to $617 million in the first three months of 2010.
In moves clearly aimed at getting consumers to turn even more strongly to cable-based VOD, Warner Bros., Universal and Fox successfully got Netflix and Redbox to hold off on offering new DVD releases to rent or stream until 28 days after they hit store shelves.
But it's only a matter of time before studios join independents like IFC and Magnolia in considering VOD as a way to offer movies at home as they unspool in theaters as well. They just have to get more consumers used to ordering the films at home first to make that a viable business.
Where Blockbuster fits into the studios' plan is still unclear.
The video rental chain still has the exclusive rights to offer DVDs day-and-date with their retail releases. Blockbuster needs those deals with the studios to keep its stores relevant and keep consumers coming through its doors. The coin studios collect from Blockbuster for each rental is considered lucrative enough to keep the deals in place. For now, that is.
But Blockbuster is expanding into digital as well, trying to get more customers to use its online rental service. If studios start considering Blockbuster a threat to their bottom lines, it's only a matter of time before Hollywood forces the retailer to abide by the 28-day window or simply buy the Blockbuster business (considering its vulnerable financial state of late) and turn it into a digital delivery vehicle for the studios.
The FCC's approval comes more than a year after the MPAA asked for the waiver. The MPAA's proposal had initially been opposed by exhibitors, who sought to protect the theatrical window at all costs. The MPAA hasn't indicated if titles will be available day-and-date with theatrical release or in a later window.
Either way, it's likely individual studios will now have to negotiate with exhibs on the sticky issue of abandoning the traditional four-month release window between launches of firstrun films and homevid.
That was inevitable. Disney, among other studios, has been increasingly bringing up the issue of collapsing traditional release windows for DVD; earlier this year, the Mouse House announced it would experiment with the homevid window for "Alice in Wonderland."
In any event, studios aren't likely to bypass traditional theatrical runs anytime soon; the box office is just too lucrative. The B.O. is up 7.3% as of May 2, earning $3.46 billion over last year's record $3.23 billion haul -- with much of that increase thanks to 3D, which has far more impact in theaters than via 3D TV, which is years from generating significant sales.
The MPAA and its member studios have been asserting that the new method of distribution would not hurt moviegoing, particularly if home viewing comes with a high price point.
VOD runs day-and-date with theatrical runs are expected to be used to push less high-profile titles more than pricey tentpoles that already lure masses to the megaplex.
"The first and best way to view movies will always be in movie theaters -- and nothing can replace the pleasure this brings to millions and millions of people all across our country and the globe," Pisano said. "But for those people unable to make it to the theater and interested in viewing a recently released movie, thanks to the FCC, they will now have a new option. For other consumers who prefer standard, linear, on-demand or DVD or Blu-ray options, these services will be unchanged."
The FCC's waiver also didn't worry the National Assn. of Theater Owners. The group issued a statement in reaction to the ruling, saying, "The FCC's decision is not surprising. Movie theft is a serious problem. The issue of the theatrical release window, however, will be decided in the marketplace."
Source: http://www.variety.com/article/VR1118018991.html?categoryid=13&cs=1&ref=bd_film
Blockbuster struck deals this year with three studios – Fox, Sony and Warner Bros. – for exclusive rights to rent new-release DVDs for the first 28 days. For studios, it preserves the higher price that box office hits traditionally fetch when they initially move to DVD. That had been threatened by Redbox's $1-a-day rental kiosks.
For Blockbuster, it's a competitive advantage over Netflix and Redbox, becoming the exclusive source of new-release DVD rentals. New releases account for up to 80 percent of Blockbuster's revenue.
"Blockbuster customers want new releases and the ease of on-demand access through simple technology that doesn't require another box or game console."
So far, about 10 million households have bought Samsung TVs and disc players with Blockbuster on-demand movies available at the push of a button on the remote.
Source: http://www.dallasnews.com/sharedcontent/dws/bus/stories/050910dnbusblockbuster.3dd1028.html
Blockbuster is on track to save $200m a year on operating costs. Additionally, the more favorable payment terms with the studios and 28 day competitive advantage for new releases is sure to add to the bottom line. Word is getting out that Blockbuster is THE only place to get the latest releases. I have noticed increased traffic in my local Blockbuster store and Kiosk locations. I expect a big chunk of the bonds will be paid down, leading to a massive rally for common equity holders, imo.
***************************************************
Blockbuster Inc. today announced new agreements with Twentieth Century Fox Home Entertainment LLC and Sony Pictures Home Entertainment Inc. These new agreements, along with the previously-announced agreement with Warner Home Video, will provide day-and-date availability of movies for Blockbuster’s store and by-mail channels. Additionally, these studios will provide new enhanced payment terms to Blockbuster in exchange for a first lien on Blockbuster Canada Co.’s assets. Blockbuster Canada will continue with business as usual by providing high-quality home entertainment to its customers.
“These important steps with three of the leading movie studios will continue a steady supply of top-rated movies for Blockbuster customers,” said Tom Casey, Blockbuster Inc. Executive Vice President and Chief Financial Officer. “These positive signs of studio support are part of our overall recapitalization effort to drive top-line performance while reducing debt and operating costs at Blockbuster. This affirms our strong and collaborative business relations with these critical vendors.”
The new payment terms help Blockbuster continue the recapitalization initiatives already underway. Management has previously announced a number of concurrent efforts to recapitalize the company and assure its long-term growth and success. Blockbuster will continue to rationalize its U.S. store portfolio and aggressively manage working capital. Additionally, Blockbuster has implemented a plan that cuts operating costs by $200 million this year to preserve cash and further improve liquidity. Blockbuster is also in discussions with advisors for its bondholders related to debt recapitalization.
“We will continue to offer our customers all types of innovations as the leading multi-channel provider of entertainment including the recently announced agreement with Warner Bros. Home Entertainment Inc. for immediate availability of new titles, the addition of BLOCKBUSTER On Demand® for select Samsung 2010 Blu-ray Players, HDTVs, and Blu-ray Home Theater Systems, and the addition of BLOCKBUSTER On Demand for smart phones launched recently on T-Mobile’s HTC HD2,” said Casey.
Source: http://www.sec.gov/Archives/edgar/data/1085734/000119312510077678/dex991.htm
STRONG BUY
Blockbuster is positioning itself to become THE place to get the latest releases. The 28 day window between the movie studios and Blockbuster ensures a virtual monopoly in the marketplace. The movie studios received first lien on Blockbuster Canadian properties. This was done through "Home Trust Companies" http://www.hometrust.ca/
http://www.sec.gov/Archives/edgar/data/1085734/000119312510077678/d8k.htm
I believe the Studios are providing the funds to retire bonds and are actively helping to transform Blockbuster. In the ongoing transformation, I expect the alliance between Blockbuster and the movie studios to grow stronger. Blockbuster will more than likely emerge as the place for consumers to watch the newest releases using video-on-demand / streaming technologies for movies before they reach store shelves.
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MPAA declares victory in FCC fight over pre-release screening
A new FCC ruling paves the way for movie studios to offer consumers scores of films before they reach shelves, but only if viewers allow the studios to disable parts of their TVs that could be used for piracy.
The commission's Media Bureau on Friday granted the Motion Picture Association of America (MPAA) a limited waiver to turn off some TV viewers' selected video outputs -- a process known as "selectable output control" that's typically barred by federal law.
The MPAA had sought the FCC's graces on the matter for years, stressing it would need that waiver before it could offer movies to viewers before the films' DVD release dates. Movie executives feared consumers would simply use those ports, when hooked up to a digital-video recorder, to pirate any pre-released movie streaming across their TVs.
The waiver issued Friday would not allow the MPAA to touch every consumer's television set at whim, nor would it grant movie studios control over an entire TV indefinitely; rather, only those who participate in the video-on-demand program would have to consent to that loss of autonomy, and the waiver would only last 90 days.
But a handful of interest groups, including Public Knowledge, long fought the MPAA on the issue, fearing it would give the studios too much control over consumers' television sets. They also argued it would force most Americans who wanted to participate to purchase new entertainment systems, as a majority of TVs would be adversely affected by studios' flick of the switch.
Intense debate over the waiver request even forced the FCC to punt on the issue, leaving the matter to the Media Bureau under the Obama administration. Their review concluded Friday with a victory for the MPAA, though the FCC ordered all stakeholders to report their findings back to the commission in two years.
While the MPAA received far less than it first requested, the FCC's decision nonetheless enraged Public Knowledge, which lambasted the commission for succumbing "to the special-interest pleadings of the big media companies."
“At no point in this proceeding did any of the content companies make the case that any ‘piracy’ was occurring because material was sneaking out of the back of a TV set onto the Internet," said President Gigi B. Sohn. "At no point did the Bureau acknowledge that the Government Accountability Office had called into question the ‘piracy’ statistics the industry has been touting for years."
“We will be watching for the first time the industry decides to exercise its control over electronics in a consumer’s home," she continued. "At that point, neither the Commission, nor, we suspect, Capitol Hill, will be able to ignore the outrage that will surely come from consumers."
The MPAA, however, rejoiced at the FCC's ruling, which it called a "victory for consumers."
“The first, and best way to view movies will always be in movie theaters – and nothing can replace the pleasure this brings to millions and millions of people all across our country and the globe,” said Bob Pisano, president and interim CEO of the MPAA.
“But for those people unable to make it to the theater and interested in viewing a recently released movie, thanks to the FCC, they will now have a new option," he added.
Source: http://thehill.com/blogs/hillicon-valley/technology/96741-mpaa-declares-victory-in-fcc-fight-over-pre-release-movie-screening
Blockbuster Management must know the Q1 numbers were better than expected, as the press release to reschedule the annual meeting and avoidance of the reverse split and regained NYSE compliance was 16 days AFTER the quarter ended. Blockbuster is making progress as evidenced by their statement on April 30. I expect Q1 numbers to be good and beat earnings estimates for BBI when the Q1 earnings report is released to the public on Thursday, the 13th.
On April 16, Blockbuster made the following statement:
“As a result of the continued progress on our recapitalization initiatives, we have rescheduled the annual stockholders’ meeting,” stated Tom Casey, Executive Vice President and Chief Financial Officer of Blockbuster Inc. “We believe the additional time will provide us with the greatest opportunity to successfully complete one or more of our ongoing recapitalization initiatives prior to the annual meeting, possibly resolving our NYSE non-compliance and avoiding the need for a reverse stock split.”"
Source: http://www.sec.gov/Archives/edgar/data/1085734/000119312510085815/ddefa14a.htm
On April 30, Blockbuster also made the following statement:
"We are currently exploring a variety of strategic alternatives to strengthen the Company’s capital structure. As a result of the continued progress on our recapitalization initiatives thus far, we believe we may have the opportunity to successfully complete one or more of these initiatives prior to the 2010 annual meeting, possibly resolving our current NYSE non-compliance and avoiding the need for a reverse stock split altogether. As such, the Board contemplates abandonment of the reverse stock split if such recapitalization efforts are successful and the market price of our common stock increases to the point where the reverse stock split would be no longer necessary to regain compliance with applicable NYSE continued listing standards."
Source: http://www.sec.gov/Archives/edgar/data/1085734/000119312510101608/ddef14a.htm
Six Questions: Blockbuster CEO Jim Keyes
07 May 2010
Following the news that Movie Gallery would throw in the towel, ceasing operations at more than 2,000 Hollywood Video, in-store Game Crazy and Gallery locations over the next few months, Blockbuster became the last chain standing offering store-based DVD/Blu-ray Disc sales and rentals nationwide.
While synonymous with movie rentals, the venerable Dallas-based brand can little afford to celebrate the demise of a key rival as it too is beset with many of the problems (notably excessive debt) that ultimately did in Gallery.
A significant difference, however, was the appointment in 2007 of new CEO Jim Keyes, who headed 7-Eleven for 21 years. Recognizing that one-stop-shop convenience is key to generating repeat consumers, Keyes quickly redirected Blockbuster efforts toward a multichannel distribution platform using the stores as a central hub.
Keyes looked under the hood and kicked the tires on the company’s dormant by-mail operation, acquired and rebranded Movielink movie downloads into Blockbuster On Demand, partnered with NCR Corp. to roll out Blockbuster Express kiosks, and aggressively incorporated Blockbuster as a VOD choice for consumer electronics devices (TVs, DVRs and Blu-ray players), mobile phones and the cable industry.
Keyes is such a believer in Blockbuster, he bought 3 million shares of common stock with his own money after being hired.
Home Media Magazine caught up with the tireless executive the week before Blockbuster reports first-quarter results to ask about Gallery, the status of the multiplatform strategy and the public perception that Blockbuster has become irrelevant.
HM: Is the pending closure of Movie Gallery/Hollywood Video/Game Crazy retail locations more a boon to Blockbuster stores or to its other distribution channels, including by-mail, VOD and kiosks?
Keyes: While we never like to see our industry contract so severely, it allows us to highlight our benefits to another set of customers who might otherwise not have been looking to change. Given their customers’ interest in the store experience and our stores’ close proximity to many Hollywood/Movie Gallery locations, some customers will naturally migrate to us. We can introduce them to the many solutions we have for their entertainment needs.
HM: Blockbuster’s multiplatform distribution channel featuring in-store, by-mail, on demand and kiosk is unique to home entertainment. Yet, despite the Blockbuster brand, many consumers, analysts and media seem unfamiliar with or appreciate the strategy. How do you change this?
Keyes: We are working hard to communicate our transformation to a multichannel entertainment company. Blockbuster has been known for 25 years for our thousands of neighborhood stores, where millions of families each week find their entertainment, and we expect to continue that for many years to come. We have evolved into other channels, such as by-mail, vending and digital because they expand our ability to meet more customer use occasions in daily life.
You will see us continue to promote each channel through other channels and to improve the linkages between channels to enrich the convenience for our customers. Our multichannel offerings are a major differentiator, and 30 million U.S. customers a year tell us we are on the right path. As we continue to tell the story to our customers, analysts and media, we’re certain people will recognize us as the leading multichannel provider.
HM: Blockbuster by-mail is as efficient as Netflix, competitively priced and features new-release titles, unlike the market leader, which announced it has 14 million subscribers. Can the gap with Netflix be bridged or would you consider licensing/selling the channel to a third party?
Keyes: We believe that our by-mail and Total Access offerings are the best in the industry, and we will continue to add new features such as our a la carte offering, Direct Access. We know that customers want to get Blu-ray and the newest releases for no extra charge, and we try to deliver on that promise every day. Again, our multichannel offering is an advantage, and our studio partners agree. So you will continue to see us be aggressive on the new-release front.
HM: There has been much talk about Blockbuster’s significant debt, much of it unearned following the split from Viacom. How successful are you in convincing debt holders that without relaxing or forgiving much of the debt, Blockbuster cannot afford to properly market its multiplatform prowess?
Keyes: It is well known that Viacom saddled us with a heavy debt burden in our spin-off. Despite that, we have launched successful offerings for by-mail, vending and digital, and we will continue to innovate regardless of our capital structure. We are exploring options to recapitalize the company in the best interest of all our constituencies, and we continue to make progress in transforming the business, focusing on core assets and reducing operating costs. We regularly engage with our debt holders, and they understand and support our goals and direction. We hope that soon we can move beyond capital structure issues to further focus on our customer’s needs.
HM: NCR indicated that Blockbuster would become more involved in supplying Blockbuster Express kiosks with content. How successful can that be considering your new studio agreements and the 28-day delay for kiosks?
Keyes: Blockbuster’s strategy to be a multichannel entertainment solution is strongly supported by our studio partners, and we believe those strong relationships can translate to kiosks as well. We think the 28-day window for new releases that we enjoy reflects that studio perspective and is a huge competitive advantage for us. As customers expect to find a uniform experience wherever they see the Blockbuster logo, we are eager to work with the studios and NCR to negotiate for early release across all of our platforms — stores, digital, mail and kiosks.
We continue to experiment with various business models to deliver on our multichannel strategy. You will see us push the envelope in stores around the country, from micro-stores to super-stores and everything in between. We want not only to offer movies and games, but also consumer electronics, licensed merchandise and even services. Our goal is to continue to evolve the store experience to meet the needs of our customers.
HM: How do you deal with a growing segment of society that has become used to ubiquitous access to content online for free? Will there ever be ad-supported streaming at Blockbuster.com?
Keyes: High-quality content will always have a commercial value, whether it is a subscription, pay-for-use or advertising-supported. We find that there is a huge demand for top-quality movies and games for home entertainment. People still value commercial-free access without the distraction of pop-ups and banner ads. Convenience is something that busy families and individuals really value. Our business model and competitive advantage is quality and variety with great convenience and at a low price.
Source: http://www.homemediamagazine.com/blockbuster/six-questions-blockbuster-ceo-jim-keyes-19326
STRONG BUY
There are no more large bond trades. Maybe Blockbuster is done buying back bonds at current discount levels? With earnings around the corner, and conference call fast approaching I expect a run as investors scramble for shares. The 28 day window, and unprecedented access to new releases has to be a "game changer". I believe earnings will exceed expectations (which many are discounting for bankruptcy). Just like Coke and Pepsi, Redbox and Blockbuster are here to stay, imo.
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
Bond Prices Headed Lower
Most recently, 1M+ Bonds traded at $19.25
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
Analyst: Kiosk/Mail Rental Strong Despite Window
Recent 28-day delays on new release titles imposed upon Netflix and Redbox kiosks appear not to have a detrimental impact on tent-pole movie rental turns, an analyst said.
Eric Wold, analyst with Merriman Curhan Ford in New York, said embargoes mandated by Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment might not have the desired chilling effect on lower margin $1-per-day and by-mail DVD rentals.
Wold, who cited The Blind Side as the first major box office title impacted by the delay, said the Warner title ranked 1st on the Rentrak weekly chart (ended April 25) when it became available on Redbox and Netflix after ranking 5th and 3rd the previous two weeks.
“We believe this is a positive indicator that demand for The Blind Side remained strong and consumers (for the most part) were willing to wait the 28 days until it was available in the two channels that provide both lower price points and greater convenience,” Wold wrote in a note.
The analyst, who covers Redbox and Netflix, said investors of Redbox parent, Coinstar, had become concerned about the potential negative impact on DVD rental demand by the shipment delay.
Wold said that despite some fallout regarding Netflix “caving to the studios” (as one pundit described it), the windows agreed to by the online DVD rental pioneer with the three studios are unlikely to lead subscribers to cancel their memberships.
Redbox customers, however, had been deemed a wildcard demographic by analysts as each rental transaction is an often impulse standalone decision and not based on a monthly subscription.
“We believe customers are more likely to remain loyal to Redbox and choose replacement DVDs during the window in order to avoid the video store or VOD for rental fees that are at least four-to-five times Redbox’s single day rental rate,” he said.
Source: http://www.homemediamagazine.com/financial/analyst-kioskmail-rental-strong-despite-window-19308
STRONG SELL
Movie Gallery was also in the process of closing stores / cutting costs etc... with around only HALF the debt Blockbuster has, and they still went bankrupt!
Strong Sell
Actually not, the movie studios goal is to have a 28 day window so the consumer will buy more DVD / Blu-Ray, not to save Blockbuster. The studios received a first lien on Canadian Blockbuster properties. Once Blockbuster declares bankruptcy, the lein ensures the Canadian Blockbuster stores will stay closed. I think the studios stand to benefit more with Blockbuster gone, imo.
Blockbuster and Movie Gallery Pay the Ultimate Late Fee
When Ford (F) produced the first Model T in 1908, transportation as a whole changed instantly. While the horse drawn buggy had its time to adjust to the change, it was quite clear from that day forward that its future was limited. When Redbox and Netflix (NFLX) came onto the scene, brick-and-mortar movie rental chains shared a similar fate: they had time to make changes, but needed to adapt as soon as possible if they wanted to stay in the game.
Movie Gallery (MVGRQ.PK), the owner of the rental chain Hollywood Video, decided to stick with their business model at a time when they should have been looking for the exit. They instead decided to continue expanding, one store after another. In 2005, the company acquired Hollywood Entertainment, and continued opening roughly 100 stores a year, two moves that put them under a substantial amount of debt.
This acquisition happened a year after Redbox, which was started by McDonald's Corp. (MCD), had already been introduced in 140 McDonald's (Redbox is now completely owned Coinstar (CSTR), which bought out McDonald's remaining 47% stake for $175 million in February 2009) . The technology was out there. They could look around and see the potential changes that were coming, the low cost alternatives that could bring them to their knees. But instead of addressing the new business environment, Movie Gallery went all in, betting that their “horse drawn buggy” could outperform the Model T.
In September 2007, the company began having its first of a long line of financial troubles, and was forced to close 520 stores. Less than a month later, the company was forced to file for Chapter 11. After emerging from bankruptcy in May 2008, the company continued its struggles for less than two years, before being forced to file for Chapter 11 bankruptcy protection yet again on February 3, 2010. As of February 2010, the company still operated 2415 outlets in the U.S., and had plans to close more than half of them. This past Friday, the story came to an end, as people familiar with the matter informed reporters that the remaining stores will be closed over the coming months.
Movie Gallery made a critical mistake that ended up costing them everything. When Redbox hit the scene, Movie Gallery should have sat down and considered the possible outcomes of their competitor’s success. Is this a real threat to our way of doing business? At first, Redbox was very likely not cost effective. But with a powerhouse like McDonald's backing the venture, Movie Gallery and Blockbuster (BBI) should have both realized that this could potentially be a game changer, and done anything necessary to protect the moat they had, the dominant position that they held from already handling thousands of DVDs every single day.
Netflix, another game changer, was started in 1997, and had its IPO on May 29, 2002. From 670,000 subscribers in 2002, the company increased their count to an astonishing 5.6 million subscribers in 2006. In 2004, two years after Netflix had their IPO and five years after they had first launched their monthly subscription concept, Blockbuster finally came onto the scene, introducing an online DVD rental service. After sitting around and watching Netflix steal the business that they had built an economic moat around, Blockbuster was now the one left standing outside the castle’s walls. Today, Blockbuster has failed to make any significant stabs at either Netflix or Redbox, and has warned that they could soon be forced to seek bankruptcy protection.
Companies around the world should take note of what has happened in the movie rental business. Blockbuster is currently sitting on over $800 million in debt, and has lost nearly $1 billion combined over the past three years. For anybody who bought BBI stock at the start of 2000, a $10,000 investment is now worth a laughable $266 dollars. Looking back on what now appears to have been a golden opportunity, Blockbuster turned down the chance to buy Netflix for $50 million in 2000. And I don’t blame Blockbuster for turning down the offer; ten years ago, the future was much cloudier, and they could have found plenty of reasons to pass. But this doesn’t give them the leeway to close their eyes and blindly stick to their business model. They should have kept their eye on Netflix, and with any sign of potential success, jumped at the opportunity to either buy the business for a larger sum, or create their own way to use their competitive advantage to take a stranglehold on the market. But they looked the future dead in the eyes, and decided that they would rather fight it than attempt to adapt from their set business model; this decision ended up costing them everything they had.
This same idea can be applied to companies all across the world. For Apple (AAPL), for example, failure to innovate would quickly mean the end of everything that took years to develop and implement. If they sat down today and called the iPad the pinnacle of technological development, they would quickly find out that they had made a gross miscalculation. The same holds true for companies well outside the view of Silicon Valley. PepsiCo (PEP), for example, spends millions annually to complete new research and development and to stay ahead of the pack. One challenge they face is to reduce the amount of salt in their snacks, while still delivering the same taste that consumers have grown accustomed to. Without these developments, PepsiCo would undoubtedly lose sales in the future to companies that cater to the needs of health-conscious consumers, a growing portion of the population.
Failure to innovate and adapt to consumer desires is a pitfall of countless businesses, a majority of whom find themselves with no other options once they finally realize that they can’t survive without adapting. Movie Gallery realized this too late, and is paying the price today. Blockbuster has fought off the apparently inevitable up to this point, and unless they can quickly implement an improved business model, will soon follow the route of the horse drawn buggy.
Source: http://seekingalpha.com/article/203016-blockbuster-and-movie-gallery-pay-the-ultimate-late-fee
Freddy, lol
You should care about Q1 results, as all indications point we are set for a continued decline, imho.
The shorts are smarter than you think, they will cover when this stock goes to 0, or darn near close to it when BBI declares bankruptcy.
Good luck Fishy', man I am afraid your gonna need it after the Q1 earnings disappointment!
Bond prices continue to slide. Last price $19.50 @ 11:30am.
Source: http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MDkzNjc5QUMy
We did go up that Monday as I predicted, however the upside was short lived. Bankruptcy remains a good possibility. Movie Gallery had ~ 600M in debt and Blockbuster has over 1B in debt! GLTY
"We took a number of steps to respond to our business challenges and position our company for success. However, these actions simply weren't enough. A decision has been reached by the board of directors to liquidate the entire assets of the organization. Again, I want you to know that this was a very difficult, but necessary decision."
I would not be surprised if Blockbuster makes a similar announcement, eom.
Source: http://www.gofanboy.com/home/news-archive/2618-leaked-memo-shows-all-game-crazy-locations-being-liquidated
Strong Sell
Bond prices seem to be decreasing as of late. Last price $21.75 @ 4:09 pm. A few days ago the bond prices were ~ $26 / $27. Movie Gallery went bankrupt and they only had ~ $600m in debt. Blockbuster has what? ~ 1B in debt! Post Bankruptcy, with a clean balance sheet and new focus, Blockbuster might return to profitability. Bankruptcy is a real possibility, imo.
Looks like even Meyer is voting for the reverse split.
"APPROVAL OF AN AMENDMENT TO THE COMPANY’S CURRENT CHARTER TO EFFECT
THE REVERSE STOCK SPLIT
Please refer to the Company’s 2010 Proxy Statement for a discussion of such proposal. We intend to vote, and recommend that you vote, FOR this proposal."
Source: http://www.sec.gov/Archives/edgar/data/1085734/000101968710001657/meyer_prrn-2.htm
Strong Sell
Looks like more bagholders in bbi today, headed lower, eom.
NCR Continues to Grow BLOCKBUSTER Express in Northeast with Deployment at Xtra Mart Convenience Stores
Xtra Mart offers customers 80 locations to access DVDs at $1/night
DULUTH, Ga., May 04, 2010 (BUSINESS WIRE) -- NCR Corporation (NCR) continues the growth of its outdoor BLOCKBUSTER Express(R) kiosk deployments, adding 80 Xtra Mart convenience store locations. Xtra Mart has 150 locations throughout Maine, New Hampshire, Rhode Island, Massachusetts, Connecticut, New York, Pennsylvania and Maryland. Kiosk deployment will begin in May and is expected to finish this summer.
Xtra Mart customers can rent their favorite new or classic movies conveniently and affordably through NCR's BLOCKBUSTER Express-branded kiosks, which offer standard DVDs for only $1 a night with no membership required. Customers simply use their credit card at the machine and are charged $1 per night until they return the DVD to any BLOCKBUSTER Express kiosk -- not just the kiosk where they rented the DVD. The kiosks will be stationed outside Xtra Mart locations, allowing customers to rent a movie any time day or night, making the DVD kiosks even more convenient for consumers.
"Xtra Mart is constantly striving to provide premium services and products to our customers. Installing DVD kiosks outside our stores accomplishes just that," said Robert Sanft, category manager at Xtra Mart. "We knew that we wanted to partner with a company that was as dedicated as Xtra Mart to providing customers with fast and reliable access to products and services."
NCR's outdoor kiosk is the most secure and highest-capacity weather-protected DVD-rental kiosk in the industry. With capacity for more than 900 DVDs each, the kiosks can provide consumers the widest, most popular selection of new and classic DVDs available. For a full list of titles available at BLOCKBUSTER Express kiosks, visit www.blockbusterexpress.com where consumers can also rent a title online for pickup at their chosen kiosk.
"By partnering with NCR, Xtra Mart is providing its customers with a total shopping experience, including fuel, food and entertainment at convenient locations with flexible hours," said Alex Camara, vice president and general manager, NCR Entertainment. "Our DVD-rental kiosk deployments are continuing to grow as more retail partners decide to incorporate entertainment options into the everyday shopping benefits they offer customers."
Source: http://custom.marketwatch.com/custom/tdameritrade-com/html-story.asp?guid=%7B5E4AC870-58C5-44ED-B47B-0E17649F2922%7D
Can Movie Gallery's Death Save Blockbuster?
Though Movie Gallery had already declared bankruptcy, things went from bad to worse over the weekend as the company has decided to close all of its 2,415 stores and liquidate its inventory. The movie rental chain had hoped to stay alive after some restructuring, but it couldn't stop the bleeding fast enough. Movie Gallery also operated locations under the Hollywood Video and Game Crazy brands, and all will be closed at an undetermined date.
This prevents an interesting dilemma for investors in regards to the top brick-and-mortar rental chain Blockbuster (BBI). Will the company continue its own descent to the bottom and follow Movie Gallery into oblivion, or will it turn Movie Gallery's failure into a success now that it has the market almost all to itself?
Judging by share prices today, investors seem to thing Blockbuster will stick around. BBI stock is up 12% in intraday trading as of this writing. Netflix (NFLX) is also up 2% -- but considering the stock is up 64% since February, that's nothing to write home about. In fact, some experts think Netflix should be sold after this red-hot run because it's way overbought.
But that's a separate conversation ... the bottom line is that whether or not you think the mail-order DVD stock is priced right, it is the elephant in the room when it comes to movie rentals. Blockbuster has posted three straight quarterly losses and is on track to post another when it posts earnings on May 13, while NFLX has grown its EPS in the last three quarters and is set to do so again if it hits estimates for next quarter. It's going to take some serious revenue and restructuring for BBI to fend off Netflix.
Believe it or not, Movie Gallery could go along way towards helping Blockbuster on this front. While the chain wasn't profitable, it did manage to generate $750 million per year renting video games, DVDs and Blu-ray Discs out of retail locations. Netflix may gobble up some of that pie to meet the demand, but Blockbuster has a good shot at some of these customers. In fact, it may have a much better chance of reaching out to these consumers than Netflix does.
Some Movie Gallery customers were hardcore movie fans who don't want to wait for some of the titles that are delayed in release by Netflix, or in too high of a demand to be shipped promptly. Netflix and ultra-cheap DVD vending machine operator Redbox both have 28-day delay for new release title negotiated with studios, ostensibly to prompt DVD sales by die hard fans in that initial month-long window after release.
That means if you don't want to wait you have two options – buy the disc at full price, or rent it from your local video store. With Movie Gallery out of the picture, BBI now has a near monopoly on this market.
BBI execs recently announced they inked two more deals with movie studios securing rights to rent movies from its stores and by mail the same day they are released for sale on DVD. The deals with Twentieth Century Fox Home Entertainment and Sony Pictures Home Entertainment are important weapons in its fight to prove it can provide quicker release of quality films than its mail-order rival Netflix or the vending machines of privately-held Redbox.
Yes, Blockbuster is on the verge of bankruptcy. (Read more about Blockbuster BBI stock and its challenges here.) In its 10k filed in March with the SEC, Blockbuster said that if it can't boost its operating income and if it is unable to restructure its debt, the company has "substantial doubt about our ability to continue as a going concern."
But Blockbuster is fighting for all its worth. If it can actually turn a profit soon, the company may not just avoid bankruptcy but give Netflix a real run for its money.
Source: http://www.bloggingstocks.com/2010/05/03/can-movie-gallerys-death-save-blockbuster/
You got that right! That's why I am going to wait rather than buy in at current levels and have a mega loss.
Sorry to burst your bubble brother Flippy. I am not a shorter. My sentiment in regards to Blockbuster directly correlates to todays trading activity, up to .45 now back down to .41 and headed lower. More bagholders, strong sell, eom.