Egotard,
Welcome to the thread! You make some interesting points regarding BBI and BBI has been punished by the market and I can understand why you hold it. It does look cheap and they will be milking their cash cow.
Personally, I believe Cable, traditional movie rental (BBI, MOVI, etc), and mail order movie rental can all co-exist.
Regarding BBI, I see strengths within their distribution network since Blockbusters have permeated the United States and one can think of each Blockbuster store as BBI's own Distribution Center.
However, I do see some flaws. The migration towards a monthly fee arrangement could devastate Blockbuster's profitablity. If you look at BBI's income statement over the past couple of years and back out their one time charges, BBI was profitable due to late fees and purchases at the stores. The migration to the monthly fee may further exacerbate their problems. Furthermore, the "distribution" of movies creates a cost structure problem. Too many stores to compete effectively against NFLX.
One thing that is NFLX's "competitive advantage" over BBI is that they recommend movies to users using a system that is similar to AMZN's recommendation system. This gives NFLX an advantage over others that are new entrants. Yes, newer entrants can charge less, but shooting from the hip, I'd reckon that NFLX rents more "older releases" than any new entrant based upon this recommendation system.
Blockbuster does have a great name for movie rental. Perhaps I am splitting hairs, but I do believe that Netflix has a great name for on-line movie rental. However, most likely, Blockbuster can transfer their brand equity to on-line.
Best regards,
David |
