Blockbuster's Kiosk Assault Augurs DVD Industry Changes - Or Does It?
What will be the ripple effects of Blockbuster Inc.'s plan to close stores and expand its kiosk network (up to 10,000 kiosks) by this time next year? Is it an admission that conventional video rentals and sales don't work in this era of Redbox and Netflix? Is it an acknowledgement that Blockbuster's three-decade old storefront formula has finally gone stale?
Or does it say something bigger about viewers' interests in DVD viewing? Despite the widely contradictory forecasts for packaged media - including Blu-Ray discs - the future of home video may wind up linked to the fate that Blockbuster faces in the coming year.
Blockbuster CEO James Keyes, in a wire service interview, last week indicated that the company will shutter nearly 5% of its stores globally by the end of this year, adding that closings "could be more aggressive" as vending machines are installed. He expects to have 500 kiosks in place by the end of August, and more than 2,500 by December. Blockbuster needs to increase cash flow, Keyes said in the Bloomberg interview, noting that the company must replay more than $350 million of outstanding long-term debt by the end of 2010. The company lowered its 2009 EBITDA forecast (earnings before interest, taxes, depreciation and amortization) last week to about $290 million, about 3% lower than its previous forecast.