Holy popcorn! Blockbuster to close up to 960 locations
Blockbuster had been pitching consumers -- and Wall Street -- on the idea that it could offer a unique value proposition by combining online and mail order DVD viewing with the convenience of renting movies in-store too. The problem? That benefit just isn't attractive enough to consumers to justify the cost of operating a chain of stores that are growing less relevant everyday. The decision to quicken the pace of store closings is an admission that this strategy isn't working.
The argument in favor of the news is, as Jon Ogg points out at 247WallSt.com, that most of Blockbuster's EBITDA (earnings before interest, taxes, depreciation and amortization) comes from a few stores, and that it can be more profitable as a smaller company. But that's true of any chain: the stores closed are always the weakest. The question is whether Blockbuster has any competitive advantage over Netflix and Redbox after it's closed a bunch of its stores.
All other things being equal, Blockbuster has one major disadvantage: a lousy balance sheet. And with nothing except "me too" ideas like rental by mail and DVD kiosks, it's hard to see Blockbuster existing as a meaningful part of the industry for too much longer.