Blockbuster emphasizes its online program over stores
After closing nearly 300 stores in 2006, Blockbuster Inc. expects to close another 282 stores this year as it continues to invest in Total Access, its e-commerce program that gives subscribers the option of returning their online rental DVDs by mail or exchanging them at participating Blockbuster stores for free in-store movie rentals.
In a new regulatory filing, Blockbuster, No. 51 in the Internet Retailer Top 500 Guide, says its ongoing investment in Total Access should generate more than 4 million subscribers by the end of the year – up from about three million subscribers now – and help the company garner more market share against rival Netflix Inc., No. 18 in the Internet Retailer Top 500 Guide. “We have invested heavily in Total Access during the first half of 2007 to capture market share in the overall video rental market and to set the stage for the expected future profitability of our online rental business,” Blockbuster says in its filing.
Blockbuster says Total Access has had a positive impact on its online movie rental revenue, which in the first quarter reached $108.9 million, or 10.4% of total movie rental revenue of $961.8 million. That compares with $51.2 million, or 4.9% of total movie rental revenue of $956.1 million, in the prior year.
Total Access also is helping Blockbuster generate more cross-channel sales and traffic, the company says. Average store traffic is about 4,800 shoppers per month and the average store accounts for about 45,000 rentals per month, Blockbuster says. “Growing the revenue of Total Access has helped to offset the in-store revenue decline,” the company says in its filing.
Blockbuster has spent heavily to promote Total Access. Blockbuster says it spent $35 million in mass media advertising for Total Access in the first quarter. The company reported a Q1 loss of $46.4 million on revenue of $1.47 billion vs. a net loss of $1.9 million on revenue of $1.39 billion in Q1 of 2006.
Total Access will help Blockbuster increase its share of the movie rental business, which it estimates to be about 40%, the company says in its filing.
But Blockbuster still trails Netflix in online subscribers. Netflix posted a 36% year-over-year increase in revenue to $305.3 million for the first quarter ended March 31, and finished the quarter with 6.8 million subscribers, up 40% from a year ago. Netflix also is investing more than $40 million in new digital download technology in 2007.
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