Unprofitable Blockbuster locations will get the axe over the next year, as the United States' largest movie rental store looks to regain some working capital.
Blockbuster's regulatory filing with the SEC says 810 to 960 stores will be closed by the end of 2010. Some of these closures are normal -- Blockbuster had already planned to shutter 380 to 425 locations over two years -- but the company will also begin "accelerated closures" starting this year. It will also convert 250 to 300 stores into outlets that focus on selling used DVDs, the Los Angeles Times reports. Currently, Blockbuster operates 4,356 stores in the United States.
The company expects to get $26 million in working capital as a result of the closures.
There's a telling slide in Blockbuster's filing that details where the retailer wants to go in the years ahead. It speaks of transforming Blockbuster into a "multi-channel brand" that is "the preferred choice for convenient access to media entertainment." While Blockbuster intends to shrink down its store presence, it sets lofty goals for mail-order subscriptions, rental kiosks and digital distribution.
For digital, Blockbuster says it wants presence "in nearly every Internet-connected device." Kiosks, the company hopes, will have a "major market presence" that, while not a huge generator of capital, will bring profits through "synergies with stores." As for mail-order, Blockbuster is counting on a growing subscriber base that brings in high profits.
My thought is that Blockbuster better get cracking on some of those ambitions, because so far I've yet to be impressed. Blockbuster recently lowered its kiosk prices to $1 per night, but still offers no competitive edge over the more established Redbox. The company's mail-order service lets you pick up movies from a store, but that option adds to the subscription price, again leaving no advantage over Netflix. Finally, Blockbuster's digital distribution is completely absent from portable media players or game consoles, which seems like a major oversight.
But the biggest issue is the lack of glue between all of these services. They seem to function as disparate parts rather than one cohesive product. Worst of all, the outlook slide in Blockbuster's filing doesn't even acknowledge that as a weakness. Financially, Blockbuster may be in dire straits, but the real problem is much deeper.
