Blockbuster: Can We Shut Down the Stores?
Posted on Monday, August 13th, 2007 | In Stocks to WatchWell, it seems Blockbuster (BBI) finally acknowledged the future. In a rumored $20 million deal, they are to acquire Movielink which is currently owned by several Hollywood studios.
Although one might ask Blockbuster, “what took so long?” Blockbusters is clearly the last one to this party. Cable companies like Cablevison (CVC) and Time Warner (TWC) have spent the last 3 years buiding video-on-demand services and signing up millions of customers. Apple (AAPL) has added movies to their iTunes service, Wal-Mart (WMT) opened a movies over the internet service, Amazon (AMZN) and Tivo (TIVO) launched the unBox and arch rival Netflix (NFLX) got into the download game in January.
Rather than hemorrhaging shareholder cash for the last two years, why wasn’t this deal done then? It has been rumored forever it seems. How much of a lead could Blockbuster have over it’s rivals had it not spent all this time trying to convince people they still want to go to the video store?
Will Blockbuster finally abandon the store model? They clearly do not have enough cash to continue on the current path and go in every direction. With almost 1,000 stores still around, there is still a ton of work to be done and as long as they have the stores cost around their neck, they can never truly compete with Netflix.
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Cablevison, Internet service, Movielink, Netflix, Stocks to Watch, Time Warner, USD, Wal Mart, years buiding video-on-demand services
 About Todd Sullivan (http://valueplays.blogspot.com)
Todd is a Massachusetts based value investor, that looks for companies whose current valuation is at a discount to their true value. When he purchase a stock, his typical holding period is several years, and he considers buying a stock purchasing a piece of the business. He feels that once he makes a decision to buy that eventually the market as a whole (however long it may take) will recognize the true value of the business and value it accordingly. His widely featured blog, ValuePlays, is a highly regarded investment resource that covers his successful investment strategies. |
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