Blockbuster, Staggered, Loses Its Footing

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Blockbuster, Inc (NYSE: BBI), nearly ruined by the high cost of its store network and withering from competition from NetFlix (NYSE: NFLX) and the kiosk operator Redbox, posted another quarter of dismal results. The rental chain’s net loss for the first quarter of 2010 was $65.4 million, or $0.33 per share, compared to net income of $27.7 million, or $0.12 per share, in the first quarter of 2009. Revenues for the period was $939.4 million, compared to $1.09 billion for the period a year ago.

Worldwide same-store sales for the first quarter of 2010 declined 7.1%.

The stock fell over 17% after hours.

Blockbuster’s initiatives to save itself are almost certainly too little, to late. In a partnership with NCR it has opened 4,000 rental kiosks. Redbox has over 25,000. Blockbuster also has an untried partnership to download content to T-Mobile’s HTC HD2 smart-phones. Premium films and TV have been available on handsets for several years, but the business has been slow to gain ground.

Blockbuster is still burdened by its operation of 4,914 stores. Its major competition is from relatively lower cost DVD-by-film, digital download, and kiosk operations.

What was true last year is still true at the end of its most recently reported quarter. Blockbuster has no future.

Douglas A. McIntyre