Blockbuster Plays Hard Ball with Hollywood
By Tom Ryan
Earlier this year, Blockbuster reached agreements with Warner Bros.,
Fox and Universal that gave them access to new releases for a period of 28
days before Netflix and Redbox, as well as more favorable payment terms. What
wasn’t learned at the time was that studios opting in would be getting better
shelf space at its stores than those who didn’t.
The policy came up last week
after an analyst on Blockbuster’s first-quarter conference call asked why he
only saw two copies of "The Lovely Bones," from
Paramount Pictures, at his local Blockbuster.
"Frankly, it’s pretty simple," said CEO James Keyes, on the call. "There’s
some studios working proactively with us with day-and-date windows. And we
want to support them and reward them. They’ve been very helpful to us
in being able to provide a competitive advantage. Those studios who are still
providing our competitors with an advantage, you know, not so much. We’re going
to work with them, but if we’re out of stock on a movie that is in-stock
with our competitor, so be it. We’re going to help those who are helping us."
afterwards to the Hollywood Reporter, Mr. Keyes elaborated, "Warner,
Fox and Universal have worked very cooperatively toward agreements that actually
allow us to be in stock. I’ve encountered as a retailer an acceptance of opportunity
cost — a product being out of stock. If the deal structure for ‘Lovely Bones’
makes it prohibitive to stay in stock, that’s a loss for the studio and for
On the call, Mr. Keyes noted that since over 60 percent of
the industry’s $22 billion rental and retail business represents new releases
during the first 28 days of street date, "we believe that these agreements
provide a significant competitive advantage for Blockbuster’s stores and for
our cross-channel offerings."
He also noted that given the retailer’s
liquidity issues, Blockbuster hasn’t been able to advertise its new release
"We do believe this is a significant opportunity going forward and for
the first time in many years, we now have a tangible advantage to communicate.
And we hope that additional funds and studio co-op advertising can be used
to promote this advantage," said Mr. Keyes. "Finally, we believe
more studios are likely to introduce a window and that, over time, this will
strengthen this virtual exclusivity, if you will, in new release rentals in
Blockbuster posted a loss of $65.4 million in the quarter as revenues
declined 13 percent.
Discussion Questions: Does Blockbuster’s 28-day new release policy with
studios provide it with a sizable competitive advantage? What do you think
of the "opportunity
cost" of favoring certain studios for special terms if it leads to out-of-stocks
- Blockbuster warns studios it’ll play favorites – Hollywood
- Blockbuster Reports a Loss on Weak Sales – The Wall Street Journal
- Blockbuster Q1 2010 Earnings Call Transcript – Seeking Alpha