In Feburary, Blockbuster offered to acquire Circuit City but in essence has been ignored as CC failed to provide the due diligence necessary to make a definitive proposal. To force the issue, Blockbuster has made the $1B proposal public. Blockbuster seems to have been diversifying beyond “just a movie rental company” to transform themselves into a retail company for media content and electronic devices – both of which have been converging…
I’m not sure how their respective shareholders feel about this sort of business combination, but to me it seems like two companies dying a slow death joining forces to die together faster. Blockbuster is losing out to Netflix and soon to online movie streaming while Circuit City is losing out to Best Buy, Wal-mart and the online retailers. Together how will this be any better? I’ll tell you two companies that are jumping for joy about this news – Netflix and Best Buy!
Does Blockbuster City sound like a logical “store” to you?
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What surprises me most is that Blockbuster has sufficient cash or credit line for a deal like this. Given their track record and current core competencies, if I were CC I would have ignored the unsolicited bid too. ;)
I’m not sure there’s a consensus that Blockbuster could really afford this deal. And I’d agree that CC was right to ignore the offer…
I have yet to see how these could mesh, around my area Blockbusters keep closing down. Where is their capital to buy CC? It would seem to me someone more with a strong retail background would want CC (Wal Mart, Kmart/Sears Holdings, RC Wiley, or even Fry’s). Circuity City made the wrongs moves by not getting fully into computers like BB did 10 years ago, they dropped appliances right before they became profitable (see BB, Home Depot, Kmart, Lowes, Fry’s). It will be interesting to see what happens, it’s obvous CC does need some cash when you walk into their stores I don’t think they have seen a carpet cleaner in years….
How refreshing a take from the standard financial press; someone who recognizes two weak entities merging/partnering/etal is probably not a strength.
Blockbuster City sure sounds better than Circuit Buster! ;)
I have to agree with you and everyone here: this is a bad move for Blockbuster. It’s funny how BB has the potential to completely displace a company like NetFlix, but hasn’t. I use BB for my video rentals because there is a store conveniently located near me, where I can take my online rentals in and get some “free” rentals for the month. That’s the one thing that made BB more attractive than NetFlix. If they would add download movie rentals, they would be able to compete with Netflix and it would be a far better investment; instantly expand without the physical and staff overhead.
A question would also be, how is iTunes doing with it’s movie rentals? Have online downloads cut into BB or NetFlix DVD rentals at all?
Obviously in the long run unless Blockbuster does SOMETHING they’re toast. Whether they’re displaced by VOD from Comcast or DirectTV or downloads from Amazon/iTunes or something else, digital distribution will eventually kill them.
Legal MP3 downloads are now what 1/3rd of the overall music distribution, not counting the 30:1 P2Ps that you should either count or not depending on what you think would happen if they were suddenly not free.
I can’t imagine the movie business is anywhere near this. Presumably iTunes and Amazon and so forth only account for a tiny fraction of the movie rental business that is presumably still dominated by DVDs. Yet Comcast is touting its VOD numbers, which are obviously growing quickly. If we could just break the 30 day window (even if it were for more money), things would shift even more quickly.
And I don’t think we need to get to the point where VOD/downloads are 50% of the market to put Blockbuster out of business. Probably even a small shift could give them serious heartburn.
Its shocking to watch a leader like that be so complacent in the face of all the obvious competition. Years after it was obvious that digital distribution would eventually be the way things would go, Blockbuster is just starting to think about a standalone (pointless) set top box? Obviously the guys who run these companies aren’t worth much.
And watching Netflix run rings around Blockbuster has been funny too.
Is this a good idea? No. But hey, its the best idea they’ve got.
It seems that BB just misses the boat every time. They missed the boat for online rentalts and VOD; netflix kicked their butt. They didin’t even enter the areana until it was too late; red box has even hit them hard. I know I would rather rent while I’m checking out at the local grocery store than make another trip to BB. Now BB wants a part of the gaming industry; too many years to late for that as well. Game crazy and a myriad ad of others took that market. BB just cannot get it right and does not have vision of where the copmany is going or where it should be going. I do not see a merger with two dying companies a good deal for anyone. BB does need to get out of the areana before investors loose big. A Block City, Blockbuster City, City Block, Block Curcuit etc. merger would be futile. The weakest link needs to always be removed.