Blockbuster Store Closings: Anyone Surprised?

A U.S. video rental chain store Blockbuster today reported that it studies the possibility of closing some 960 stores by the end of next year. The question is not why these stores may be closing, but rather which stores and in which cities they will be closed. Blockbuster store closing list has not been revealed yet as the company will study the possibility.

Blockbuster indicated in a report to the Securities and Exchange Commission (SEC) of the United States that 18 percent of its three producing 750 establishments, are not profitable.

Dallas based movie rental company told the SEC that another 250 or 300 stores could be converted into kiosks and between 275 and 300 additional facilities could get new terms of their leases or also be closed.

In total, Blockbuster reported that about 960 of its thousand stores in the U.S. could be affected. The company said that 35 percent of its store base provides the 80 percent of its pretax income. Therefore this measure is to optimize the portfolio.

Last month, in a conference call, Jim Keyes, president and CEO of Blockbuster, said the growth of their kiosks allows the company to be "more aggressive in closing stores." "This strategy really increase our points of presence while reducing our liability returns" of businesses, he said.

This does indeed make sense. In one of our September 8th stories titled Will You Choose Netflix or Redbox we sited the competetive edge that Redbox kiosks have over Blockbuster and even Netflix. There we raised the point about Redbox having more subconscious and spontaneous appeal. Now, Netflix has the instant watch option. Blockbuster's kiosks can well compete with Redbox kiosks.

Making a special trip to get a DVD is so 20th century. This is especially true in light of Netflix's instant watch or Redbox's spontaneous, subconscious appeal when you are shopping in a supermarket, buying daily staff.

Now we just need to wait and see the list of Blockbuster store closings. The company said that 960 stores will also include also those that have been closed this year. The rest of the Blockbuster stores will close in 2010 and hopefully will save the company 30 million dollars yearly.

Written by Armen Hareyan

Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.