Blockbuster Pushes Additional Studios to Adopt New DVD Release Windows

Whether Blockbuster becomes “a bit more aggressive” in closing stores this year depends on whether other studios join Warner in adopting new DVD release windows, Blockbuster CEO James Keyes said in a conference call.

The chain will close 500-545 U.S. stores this year, including 403 in the first half, as it moves to expand its service beyond bricks and mortar to cable operators, CE and mobile, Keyes said. But with Blockbuster’s store business suffering from competition with Netflix and Coinstar’s Redbox, the video rental chains is seeking persuade movie studios to follow Warner’s lead in adopting new release windows, Keyes said. Warner keeps new DVDs out of rentals 28 days.

"You want to keep more stores, because if other studios follow suit, we could find ourselves with an improved customer relevance for that brick-and-mortar location,” Keyes said. “If the studios do not go in that direction, and it ends up only being Warner, and Redbox or Netflix continues to have new release availability, then you probably need fewer stores to satisfy that demand.” Without other studios’ adopting new release policies, Blockbuster will be a “little more aggressive” in closing stores and “more aggressively pursuing the other channels faster on our own,” Keyes said.

Blockbuster has blamed Redbox, Netflix and others for the downturn in its earnings, because they bought DVDs outside studios’ regular distribution channels. Redbox and Netflix have been able to get new titles shortly after their release date, Blockbuster executives have said. With the new windows, Blockbuster stores would benefit from having new titles first, and Netflix and Redbox would need to rely more on “older” movies, Keyes said.

Blockbuster shut 885 stores in 2009, 567 in the U.S. and 318 elsewhere, ending the year with 6,520 locations, the company said. Blockbuster had 4,018 U.S. stores Jan. 3, including 3,525 company-owned and 493 locations. About 350 company-owned U.S. stores closed in 2009, and 214 franchised outlets were shuttered. Blockbuster has 2,502 foreign stores, down from 2,820 a year earlier. Blockbuster shut 233 company-owned foreign stores and 85 franchised locations, ending the year with 1,695 and 807.

Blockbuster also cut expenses by eliminating “a layer of management” that won’t be replaced, the company said. These included the positions of chief merchandising officer and chief administrative officer, it said. “Certainly with a need for liquidity going forward, we decided we couldn’t have the luxury of that additional layer of management, so we pulled back” and reassigned the duties, Chief Financial Officer Thomas Casey said.

The company said it’s trying to expand distribution of its Blockbuster on Demand service. It struck alliances with cable operators Suddenlink and Mediacom to rebrand their video-on-demand services as Blockbuster on Demand. The alliances rolled out last fall first in Suddenlink’s Charleston, W. Va., and Mediacom’s Des Moines, Ia., markets. HTC also added Blockbuster on Demand to its HTC HD2 cellphone sold through T-Mobile. Blockbuster on Demand is available on Samsung TVs and TiVo DVRs.

Blockbuster’s Q4 net loss widened to $434.9 million from $359.8 million as revenue dropped $1.08 billion from $1.34 billion as domestic same-store sales declined 15.9 percent. While Blockbuster had forecast flat same-store sales growth in December, same-store sales actually fell 9.4 percent on weak holiday sales, the company said.