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the mighty have fallen 18 Jun 2010 14:00 #34164

  • Mike
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One of the "movie theatre killers' is gone from my city. The Movie Gallery video rental store had a big sell out sale and closed. Radio, TV, cable, dvd, vhs, internet, ppv, home video........... they come...they go.... we endure.
Michael Hurley
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Re:the mighty have fallen 18 Jun 2010 14:08 #34165

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two near me have closed as well. Good buys on poster cases if you get there early.
"What a crazy business"
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Re:the mighty have fallen 18 Jun 2010 15:09 #34166

In the past few years I have seen at least 10 DVD rental/resale stores go under in the city I live in (of over $350k population). Blockbuster, Hollywood Video, Movie Gallery, Movie Exchange... None have endured.

The only one that has prospered is a relatively new entity in the DVD game, Redbox DVD. Redbox DVD kiosks have been popping up like crazy, nearly tripling the number of freestanding DVD rental/resale stores. Their $1 per night rental charge have made them so popular that many of the kiosk locations have had to add a second kiosk machine to keep up with demand. And they aren't just for renting movies anymore. You can buy used DVDs now for $5 each.

Blockbuster, and others like it, are no longer a threat to our industry, that is true, but they have been replaced by a new threat... Redbox. Those kiosks are like locusts, even though they are small and have a seriously restricted selection to choose from, the shear number of them can do some real damage. Not to mention the fact that they are EVERYWHERE! Nearly every drug store (Walgreens, CVS), grocery store, big box store (Wal-Mart, Target) and gas station has at least one kiosk.

Don't get me wrong, I know that our industry will continue to survive as it always has, but it is too simple to think that just because one threat is going away (DVD rental stores) that there is not another one waiting in the wings to take its place.
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Re:the mighty have fallen 19 Jun 2010 19:17 #34172

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....it's true. The threats keep coming.
Michael Hurley
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Re:the mighty have fallen 21 Jun 2010 08:44 #34182

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These places are dying because of REdbox and Netflix. The later has streaming capabilities and agreements with the studios now for streaming. They can be ready for day in date streaming along with the cable companies. They also are hooked up to your xBox so the target audience here is the coveted 18 – 24 male. With no additional hardware to purchase and a trained user community ready to go Netflix could easily get a good size audience quickly if they start day in date streaming.
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Re:the mighty have fallen 21 Jun 2010 10:59 #34183

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There are many factors that have led to the demise of video stores. Certainly Redbox and netflix are two of them but there are many, others: online downloading, dvrs, increase internet usage-facebook, twitter, etc..

Video stores offer a lesson to any business. 1) they failed to change their polices-their prices basically pushed people into Netflix's arms. 2) way too much debt.

Redbox: does not have product from Warner, Fox, & Universal for 28 days (neither does Netflix)) It is too soon to tell how this will effect their business. As a video store owner, I can tell you my customers would be gone if they had to wait 28 days. Redbox, of the two, is the one that I wonder about the most.

Netflix customers are not new release dependent, so they will be effected less. Streaming is nice and works well. They have a nioce $9.00 package price that is well accepted. Netflix could do the day and date new release streaming if they wanted to but have not to this point. Makes you wonder why?

Movie Gallery: They bought Hollywood Video a few years ago for basically 90% debt. Video stores like many large corporations operate on small net margins. So a 10% drop in the top-line two years in a row can spell doom for a large corporation.

I know many independent video store owners are doing well. Many are looking at these closed locations as opportunties. My best guess is that 800-1000 profitable Movie Gallery stores are closing because of the large debt.
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Re:the mighty have fallen 21 Jun 2010 20:45 #34189

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Blockbuster is the only publicly traded movie rental chain still in existence after the recent demise of Hollywood Video/Movie Gallery, and their stock price (currently $0.28) isn't much to talk about. More tellingly, Blockbuster's bonds are currently trading at $0.08 on the $1, so the marketplace is telling potential investors that the firm isn't likely going to make its interest payments (and will likely default) in the near term.

A few select debtholders are talking up a potential debt for equity swap to alleviate some of the company's crushing debt load, but that is merely a stalling tactic since most of the bondholders (my opinion) will not take what is very likely to soon be worthless equity in exchange for their bond claims. With $900+ million in debt outstanding, only $100 million in cash and ~$370 million in shareholders' deficit, the company's capital structure is completely shot at this point. From a cash flow standpoint, the company burned ~$51 million during the first quarter of the year and doesn't normally start to generate real cash flows until the end of the fourth quarter around Christmas.

My guess is that Blockbuster files Chapter 7 (liquidation) sometime within the next 12-18 months and the name/trademark is eventually sold to someone else for future usage. The US segment of that company doesn't own any of its real estate and has already mortgaged its Canadian operations' real estate as collateral for the exclusive 28-day home video rental window that with the various studios.

Funny thing is that Blockbuster could have probably easily captured the home video kiosk market by itself if it hadn't chosen the poor strategy of defending its stores channel. When Coinstar first put Redbox into test markets back in 2004, my guess is that if Blockbuster had moved aggressively into that kind of market with its well-known brand slapped its name on some similar type kiosks, they could have nipped this competitor in the bud. With only 170 units in 2004 run solely out of McDonald's eateries, my guess is that Mickey D's would've shut that little experiment down in the face of 5,000 Blockbuster branded machines rolled out nationwide. Hell, Redbox only had 750 deployed nationwide as recently as May 2006 -- today, that number is approaching 30,000 kiosks in the US alone. Since the machines only cost ~$7,500 or so, that would have been $37.5 million in capex to basically kill off a competitor. By investing only a fraction of the book value of Redbox wisely (estimated at ~$340 million when Coinstar acquired the remaining 50% or so back in 2007 from McDonald's), Blockbuster could have most likely avoided its fate. Luckily, capitalism is here to sort out and re-use the assets of the market losers.
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Re:the mighty have fallen 21 Jun 2010 23:51 #34190

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BWT,

I do not believe that BB would have been able to the exact same thing because of the studios. When you are as large as BB was you have to get product directly from the studios. When Redbox started to take off and was being sued by WB/UNI/Fox, they had to buy the product from Wal-Mart/Sams/etc. There was no way BB could have done that.

In a way the studios policies are hurting BB. Thankfully I can buy my product from WM and charge whatever price I want.
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