Re: Looks like the "crappy movie effect" is bleeding into video
- From: "Nick Macpherson" <NMacphe421@xxxxxxx>
- Date: 11 Aug 2005 05:47:39 -0700
RichA wrote:
> http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=URI:urn:newsml:reuters.com:20050809:MTFH78757_2005-08-09_13-34-50_N09387142:1
>
> CHICAGO, Aug 9 (Reuters) - Movie rental chain Blockbuster Inc.
> (BBI.N: Quote, Profile, Research) on Tuesday posted a quarterly loss
> that was more than double Wall Street's forecast as lackluster new
> video releases failed to attract consumers.
>
> The largest U.S. home video and DVD rental company also said it was no
> longer on track to meet its 2005 financial forecast and said it has
> reached an agreement with creditors to waive certain debt covenants
> for the second and third quarters. Without the waiver, the company
> would have been in default, Blockbuster said.
>
> Also Tuesday, Blockbuster said it was raising the monthly fee for its
> online service. The price of a three-movie plan will rise to $17.99
> from $14.99 as of Aug. 19, bringing it in line with Netflix Inc.'s
> (NFLX.O: Quote, Profile, Research) price.
>
> Blockbuster has been spending heavily to build an online service to
> compete with Netflix, while its business has also been hit by
> consumers buying videos at retailers like Wal-Mart Stores Inc. (WMT.N:
> Quote, Profile, Research) rather than renting.
>
> But the online business is less profitable than store rentals, Stacy
> Widlitz, analyst at Fulcrum Global Partners said.
>
> "They are stuck in a Catch-22," Widlitz said of the online business.
> Blockbuster can either raise online fees and risk losing subscribers
> to Netflix, or "just continue to lose a lot of money at it."
>
> The company has been hurt by a 19-week Hollywood box-office slump
> during the spring and summer that is now working its way into the
> rental market. The company said industry weakness should continue in
> the third quarter before the video release schedule improves in the
> fourth quarter.
>
> Blockbuster posted a loss of $57.2 million, or 31 cents a share, for
> the second quarter, compared with a profit of $48.6 million, or 27
> cents a share, a year earlier.
>
> Excluding severance costs, asset impairment charges and stock-based
> compensation, the loss was 22 cents a share. On that basis, analysts
> were forecasting a loss of 10 cents a share, according to Reuters
> Estimates.
>
> Revenue fell 1.6 percent to $1.40 billion. Sales at stores open at
> least a year, a key measure for retailers, fell 4.7 percent.
>
> The declines were largely the result of the company's decision to
> eliminate late fees on video rentals, which cut into overall revenue.
>
> The plan appears to be attracting more business, as rental
> transactions rose 10.4 percent in the quarter, Blockbuster said.
>
> Still, "the bottom line is you just wiped out 15 percent of your top
> line (by eliminating) late fees, so giving us metrics excluding that
> is not all that relevant," Widlitz said.
It might not be indicative of Blockbusters elsewhere but the biggest
problem with the Blockbuster I go to--post late fees--is the new
release shelves are bare. I went in the other day planning on starting
to use the batch of coupons I got from the latest class action suit but
nothing I wanted to rent (six copies of The Eye 2 and they're all
gone--abut a dozen copies of Downfall and those are gone as well?) was
in
stock.
I'm starting to feel sorry for Blockbuster. They're finally beginning
to get a strong selection of DVDs, the pricing isn't that bad if you go
on a preferred member plan and not having to worry about returning the
DVD on a set day is nice, but it looks like it's too little, too late.
.
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