Blockbuster Sale on Blockbuster
Like an affinity for an old comfortable shoe, Sumner Redstone just can’t make up his mind about the Blockbuster unit of Viacom (NYSE: VIA.b), which is under pressure from direct rentals over cable TV systems such as Time Warner (NYSE: TWX), and from the low-cost DVDs offered at Wal-Mart (NYSE: WMT) stores and other discounters.
Meanwhile CEO John Antioco (an Italian)is overseeing the transformation of the company from pure rental to trading used DVDs.
The company plans to offer store credit for used DVDs sometime this year. But some people are about to complain to the Federal Trade commmission about their overcharging policies. Eliot Spitzer where are you? Is Blockbuster your next Blockbuster?
Blockbuster already lets customers trade in used DVD and buy selected new movies for only $12.99. Big deal, you can get them at Wal Mart for $5.99.
It said some 600,000 DVDs were sold as part of this promotion in December alone. That's 600,000 suckers who didn't shop around and bought on the emotional spur of the moment.
Last year Blockbuster acquired Movie Trading Co., and is using its models. Of course, their old models have crumbled under technological innovation and more fair pricing policies. They might be better off trying to buyout Netflix than selling themselves short.
Movie Trading more than doubled its December sales to $3 million compared to $1.3 million the previous December.
Viacom owns 80% of Blockbuster, which still generates from $300 million to $400 million in free cash flow annually. So its probably worth $3 or $4 billion, but we wouldn't even give him $2 bills for it.
Redstone has said, however, that the unit is for sale at the right price. Anything is for the right sucker who comes along.
We'd give him a penny for a dinosaur in the making. Netflix is slowly kicking them into the stone age. And when online movies evolve within the next decade, the sucker that buys blockbuster will be scraping for their pennies from the bottom of the barrel.
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