A Blockbuster of a mistake

Watching the last pathetic thrashings of Blockbuster is really quite sad.

Once the video-rental chain was one of retail’s hottest brands. Now it’s like an ageing Aunt who stinks of stale piss. Blockbuster’s time has passed and its market – which it dominated with such pomp – is dead.

In a final play of the dice, Blockbuster’s CEO Jim Keyes, is ready to offer over $1bn for US electronic retailer Circuit City. The strategy, according to Valleywag, is to sell “subscriptions to its online video services alongside the devices used to play them”, in Circuit City stores across the United States (many of Blockbuster’s current stores are far to small for selling electronic goods). So, Blockbuster wants to take on the might of Apple, Microsoft, netflicks and the cable companies, who stream (and download) content directly to their customers’ homes. And it plans to do this by buying an outdated electronics retailer. Hmmm.

Blockbuster may have the brand recognition and the contacts to make an online content business work, but why on Earth would they want to saddle themselves with another chain of unprofitable stores? This is the problem with these behemothic corporations, they *have* to control the entire supply chain. Okay, Blockbuster is historically a retail business, but if it truly wants to embrace online business, it has to keep costs low and remain flexible.

Blockbuster should shed its stores and reduce its infrastructure. Restructuring is hard and painful, but what chance does it have in its current manifestation? If it wants to be a content delivery business then it needs to forget about controlling high street retail. If Blockbuster is so desperate to display its wares, why not go into partnership with an existing nation-wide electronics outlet or superstore chain?

What a floundering company shouldn’t do is take on more debt (with uncertain returns), or increase its infrastructure without a viable strategy to deliver profitability.


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