Blockbuster’s Future Uncertain After Massive Store Closures Continue

Most everyone not living under a rock is familiar with fallen rental giant Blockbuster Video. Throughout the 1980s and most of the 90s, the rental chain was number one among all of its competitors. At its highest point, the chain boasted some 8000 rental locations in the USA alone. Moving into rural and suburban areas at lightning speed, Blockbuster often utilized the strategy of undercutting the smaller chains in the neighboring areas, putting them out of business and then raising prices once the competition was gone. If that didn’t work, the company simply bought them out and closed shop. However, things have changed as a new era is moving in, forcing Blockbuster to meet the same fate as its previous competition. The digital age is here and now customers seek out cheaper online alternatives such as Netflix, and lower-value physical media choices such as Redbox.

Redbox, owned by parent company Coinstar, allows customers to rent $1 per day DVDs and boasts over 22,000 self-service kiosk locations. These locations have been put into place everywhere from Wal-Mart to the local gas station, providing a more convenient way for movie-lovers to shop for a night’s entertainment. No longer required are the long, awkward moments spent in the video store as the clerk tries to up-sell you on products you didn’t want in the first place. Gone are the exorbitant late fees and time spent arguing with a manager about whether or not you returned your copy of “Eraserhead” on time. A customer simply walks over to the kiosk, swipes a credit card, and keeps their movie selection for as little (or as long) as they wish, at an affordable daily price. It bears noting that Blockbuster does have a licensing agreement with NCR Corporation for their own branded “Blockbuster Express” kiosks, but have since realized that these machines cannibalize store sales and are now trying to end this agreement.

Redbox isn’t Blockbuster’s only competition. Netflix has been slowly stealing market share from the venerable rental chain for the last ten years. Indeed, at a monthly subscription price of $9.99, customers can stream unlimited movies and have one DVD at a time mailed to their house. This option has begun to entice more customers, drawing them like flies away from Blockbuster’s average rental price of around $5 dollars per disc. Netflix has seen an enormous increase in its stock, which, as of the writing of this article, has skyrocketed to over $294 per share.

Blockbuster, on the other hand, was forced to declare bankruptcy in late 2010, and was sold to Dish Network for 300 million in April. Whether or not Dish will be able to turn things around for Blockbuster is uncertain. A visit to one of the local, corporate-run locations in Knoxville, TN shows that rental prices have been drastically reduced in an attempt to gain more foot traffic. It is left to be seen whether or not this will have any effect. So far, Dish Network has reduced the rental giant’s in-store footprint from 8000 locations down to around 1200.

A trip to another Knoxville Blockbuster location (this one privately owned and operated GT Management), further displayed the writing on the wall for the rental chain. This location, located on Kingston Pike, had been shuttered for good in April of 2011. A sign hanging from the door read: “Thank you for your business over the last 15 years. This location, along with our other three stores in Knoxville, are now closed. Please deposit your movies in the drop box and they will be processed without penalty.” A customer of the location was seen standing outside of the closed store, peering in through the window. When asked about the store, she stated that she wasn’t aware of the closure and was frankly surprised, as she and her husband often frequented the store for movies. Though she wishes to remain unnamed, she did offer comments about the store and its now unemployed workers.

“I’m shocked,” she stated, shaking her head. “We’ve been renting here for years and loved talking to the cashiers. They were all so nice to us and always helped us find a good movie. I hope they all find jobs soon.”

Though Dish Network seems to want to drum up more business for Blockbuster and restore the chain to its glory days, these closures seem to indicate that the road to recovery will be a long one. Whether they will be able to restore Blockbuster’s reputation or end up closing all stores is still left to be seen.