March 9, 2006, 12:00 AM

Online rentals a revenue bright spot for Blockbuster

Blockbuster grew its start-up online movie rental business 17-fold in 2005. At the same time, the number of online subscribers to Blockbuster Online now exceeds 1.2 million.

One of the few bright spots Blockbuster Inc. can point to these days is e-commerce. Blockbuster, No. 298 in the Internet Retailer Top 400 Guide to Retail Web Sites, has struggled financially for several years as it copes with changing consumer demand for leisure and entertainment products and an overall industry decline in movie-related sales. In 2005, Blockbuster’s total revenue slipped 3.1% to $5.86 billion from $6.05 billion in 2004, the company says.

But Blockbuster is also reporting that revenue from its start-up online movie rental business grew 17-fold in 2005 to $146.7 million from $8.6 million in 2004. As a result, e-commerce now represents 3.5% of its total movie rental revenue versus just 0.2% in 2004. "As we end one of the most challenging years for the in-store rental industry, we are focused more than ever on the overall profitability of our business," says chairman and CEO John Antioco. "With the elimination of extended viewing fees and the launch of Blockbuster Online behind us, we enter 2006 confident that the changes we have made to our business model and the decisive steps we took to achieve greater financial flexibility and reduce overall costs have better positioned us to further improve the profitability of our overall business."

Blockbuster, which more than doubled its number of online movie renters in 2005 to 1.2 million subscribers, is taking several steps to increase both its web business and use the Internet to drive traffic to its network of more than 9,000 stores in the U.S. and overseas. For instance, Blockbuster is upping the number of movies that online customers can obtain at stores as part of their subscription from two per month to one each week. The company also says Blockbuster Online will become profitable late this year or in early 2007.


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