Blockbuster reports Q2 loss of $57.2 million, raises subscription fees
Blockbuster Inc. today reported a greater-than-expected loss in the second quarter, due in part to a 6.6% drop in same-store rental revenue. The company ended the quarter with a net loss of $57.2 million, compared with net earnings of $48.6 million in 2004’s second quarter.
Blockbuster also announced it is raising prices for Blockbuster Online’s subscription service.
For the quarter, total revenues slid 1.6% to $1.4 billion from $1.42 billion a year earlier, largely due to the company’s elimination of late fees, a weak home video release schedule and increased competition for consumers’ leisure time. Analysts had been forecasting revenues of $1.45 billion for the quarter.
Total rental revenues, which represented 73% of total revenues for the second quarter, dropped 5.2% to $1.02 billion from $1.08 billion a year earlier, primarily due to the $138.1 million decrease in late fees. However, a large portion of the decrease was offset by an increase in base rental revenues due to the popularity of in-store and online subscription programs and increased visits to stores.
Total retail revenues, which represented 25.8% of total revenues for the quarter, increased 11.5% to $360.4 million from $323.2 million in 2004.
For the quarter, gross profit dropped 11.5% to $770.8 million from $871.4 million in 2004. Rental gross margin dropped 600 basis points to 66.4% from 72.4% a year earlier, in large part due to increased product purchases needed to grow business at Blockbuster Online.
Meanwhile, Blockbuster announced it is raising the price of Blockbuster Online’s three-movies-out rental plan to $17.99 from $14.99, effective Aug. 19. However, customers who signed up for the service prior to March 1 are guaranteed the $14.99 rate through Jan. 31, 2006.
Prices on the five-movies-out plan will increase to $29.99 from $27.49 and on its eight-movies-out plan to $47.99 from $37.49. The company says the increases reflect enhanced value and service levels for consumers.
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