Digital Home Thoughts - News & Reviews for the Digital Home

"Home video chain Blockbuster Inc. has opted to put itself up for sale after a previous bankruptcy reorganization plan collapsed and its business continued to deteriorate over the holidays. The struggling Dallas company submitted a plan Monday for an auction process to U.S. Bankruptcy Court in New York. A holding company formed by four of its largest creditors — Monarch Alternative Capital, Owl Creek Asset Management, Stonehill Capital Management and Varde Partners — has put in an opening "stalking horse" bid of $290 million."

Seems the creditors are making sure that it doesn't get sold off for a lowball bid. Too bad, I was fully willing to bid a full $20. Honestly, I really can't see where Blockbuster is worth $290 million unless they have some huge underlying assets or real estate. Their business model is pretty much sunk and while they have name recognition, I'm not certain that it is a good thing in their case.

"After dominating the home video rental business for more than a decade and struggling to survive in recent years against upstarts Netflix and Redbox, Blockbuster Inc. is preparing to file for bankruptcy next month, according to people who have been briefed on the matter."

The writing has been on the wall for this one for a while now. I'm sure Blockbuster will be a case study in business textbooks in the future as a lesson to never be too comfortable as market king. They unfortunately used their leadership position to abuse their customers and were far to reactionary to major changes in the market. Redbox and Netflix have just torn them apart.

"I heard about Blockbuster getting an exclusivity deal with Warner Bros. to rent their new movie titles 28 days before any competitor is able to, but I didn’t realize that it was immediate and would affect all forms of delivery and sales (see press release below). As you can see in the image above, The Blind Side through Blockbuster is available in-store, by mail, and on-demand. Netflix and redbox… no dice."

This is just life support for Blockbuster. It is in Warner Bros. best interested to keep them around, but I'm betting they know Blockbuster is all but dead and just didn't want to even waste their time negotiating for the delayed rental window. Like a lot of other Netflix users, I have tons in my queue, I don't go to the theater anyway, so waiting an extra month is not a big deal. I used to be a fan of Blockbuster, but they were dedicated in their intent to drive me away and were finally successful a few years ago.

"Today both companies announced a partnership to provide Blockbuster’s OnDemand movies through TiVo in the coming months. The service will be available on Series2 and Series3 DVRs and will charge customers $3.99 to rent a DVD-quality new release movie on the set-top (rentals start at $1.99). TiVo owners will also be able to purchase movies to keep, like they’re able to do currently with the 2Wire MediaPoint box, for around $20 (with DRM protections)."

Assuming they have the catalog of new releases to back this up, it is somewhat compelling. In their loosing battle with Netflix, they seem to have picked up on an niche that Netflix does not serve, the occasional rental market. But assuming that Blockbuster has negotiated with the studios to stream new releases, I expect similar availability from Netflix at some point.