Studios make Blockbuster pay for DVD releases up front (AND in cash)
 

From imdb:

So...expect higher rental fees for consumers.

Pro-B

My Blockbuster already went up from $4.20 to $4.50 two weeks ago.

So could this mean the end of BBV is even more imminent than we thought?

http://www.goodnewscafe.net/images/s..._dancefool.gif

Seriously, I recall online stores like DVDexpress.com that had to do this kind of thing in the past, and those online stores were gone very soon after this happened.

Ugh. Imagine the used DVD sale threads if that happened? This forum would be in chaos. :)

Pretty soon you'll be able to buy a DVD for less than it costs to rent at Blockbuster. (You already can now whenever Gamestop is running the the "2 for $10" and B2G1 Free promotions).

Don't forget about the Netflix effect. I imagine they are taking customers from BBV as well. Heck, if I was into renting as opposed to buying I would either Netflix it or VOD/PPV. No way in hell would I drive to BBV and put up with their crap anymore. All the BBV stores in my town are owned by 1 person and they never do the corporate deals....i.e. no late fees, etc and very few good sales.

On-line stores were fly-by-night compared to Blockbuster. Blockbuster would run in bankruptcy for a while before it actually failed.

I wonder how the Hollywood Video and Movie Gallery chains are doing these days?

A few years ago the demise of Tower Records was seen as iminent - several labels were refusing to ship CDs to them without money up front. But they are still in business ... so don't count BBV out yet.

But Tower Records is a good company and cares about what they sell- Blockbuster is not/does not.

Maybe BB will get rid of all B&M stores and simply go online...? GameRush was a failure (Lots of money lost, and their deals were WAY to good to be true, therefore they got raped).

"citing no sources"

c'mon now..... if this wasn't about BBV ya'll would demand proof :horsepoo:

I enjoy strolling around a Blockbuster, but a Barnes and Noble to their Borders would be nice. Netflix has really stolen me away from Blockbuster. That and Blockbuster's weird policy of refusing to carry unrated versions of mainstream films (like Team America) while stocking their shelves with unrated soft-core straight to video porn.

There is a store very close to where I live that I am told began charging 4.75$. I don't quite understand how you could have a different price at two chain-stores within the same city but that is another question (not that it is impossible...I don't understand how Blockbuster does it). With this said I would like to point out two things:

1. I won't feel sorry if they go away. Their utterly conservative policy (and I mean it in a bad, restrictive, manner) has destroyed anyone that was attempting to survive in my area. The only two independent stores are in a radius of about 9-10 miles and both survive primarily due to their porn selections. I spoke with one of the owners and she basically told me that people come here to rent porn...not "films". They do get the typical Hollywood releases but that's about it, no foreign, no anime, no older classics...nada.

2. The only way they, Blockbuster, will survive the competition is if they readjust their policy (read: unrated, adult-X, niche product is welcome at their stores)....which I don't see happening at least in the suburbs of Chicago (my area) so....something shall happen. I don't know what but the market will soon tell.

Ciao,
Pro-B

Your local Blockbuster's policy, apparently. All the ones in my neighborhood have plenty of unrated versions of mainstream films (including Team America's unrated version). And I live in the same town as the Blockbuster corporate HQ, so I assume there's no corporate rule against carrying such titles.

If Blockbuster went away, I'm honestly not even sure I'd notice.

On the contrary, here in NYC they're really the only place to rent from. We only have a couple of Hollywood videos that I can even think of. If they go under, I'm fucked.

I really wish there was the option for $0.99 24-hour rentals on any title. I really don't like this, $4.75 9-14day rental thing. I would rent a lot more on a $0.99 plan.

Jon

Which Tower is this? I've lived in 3 states, and every Tower is the exact opposite of what you describe.

Video Business Magazine is reporting the same. Paul Sweeting wrote the article.

Big Blue has cash blues
Nixes quarterly dividend, makes credit deals with studios
By Paul Sweeting 9/2/2005

SEPT. 2 | Blockbuster announced Friday that it won’t pay a shareholder dividend for the third quarter, marking the first time since it went public in 1999 the retailer has skipped the cash payment.

Its board determined that “at this time, it is more important to use the cash … for the business,” the company said.

The news sent shares of Blockbuster down sharply in early trading and renewed focus on the rental giant’s cash flow, which has plummeted since Blockbuster eliminated late fees at the beginning of the year.

Click here!
Over the past few weeks, the chain has appealed to studio suppliers for extended payment terms as it looks to load up on product for the fourth quarter, according to studio sources. In some cases, such as with Paramount Home Entertainment’s The Longest Yard, specific deals have had to be worked out before the studio would ship the title to Blockbuster. That title has now shipped.

The chain also recently stepped up its revenue sharing with various studios to reduce strain on cash flow.

Big Blue obtained about 70% of its rental DVDs via rev-share in the second quarter, according to a knowledgeable source. That compares to its typical quarterly average of about 50%.

Although studio sources say they are monitoring Blockbuster’s outstanding payables closely, the situation is not considered critical.

“They have the cash, but they have a lot of uses for their cash right now,” independent equity analyst Dennis McAlpine said.

Studio sources said it appeared Blockbuster was trying to conserve as much cash as possible to bolster its fourth-quarter earnings.

“They are not in imminent danger,” a senior studio exec said. “They are just using the situation to manipulate vendors.”

Last month, the chain reported a loss of $57 million for the second quarter and warned investors that the third quarter would be difficult as well. But in comments since then, chairman-CEO John Antioco has vowed Blockbuster will be back in the black in the fourth quarter.

A Blockbuster spokeswoman said skipping the third-quarter dividend would save about $3.6 million.

Still, some suppliers are starting to hedge their bets by insuring their fourth-quarter receivables against possible delays in payment by Blockbuster. Others expressed sympathy for the retailer’s position, however.

“This has happened with Wal-Mart and other accounts,” one supplier said. “I think people are blowing it out of proportion.”

An exec at an independent supplier blamed any problems at Blockbuster on the state of the industry in general.

“We’re very much aware that there is an issue here,” the indie exec said. “I’ve been explaining to the credit department that it’s soft at the box office, soft on the street, soft on sell-through and rental. No one is immune. It’s not just Blockbuster.”

Blockbuster’s cash problems began with its strategic decision to eliminate late fees. The No Late Fees program, aimed at stimulating rental growth, has cost the chain an estimated $400 million in revenue and $250 million to $300 million in operating cash flow this year.

The company claims the move will eventually boost overall rental transactions to where their revenue will eventually exceed what it was before it eliminated the fees. But in the short term, the strategy has taxed Blockbuster’s inventory, requiring deeper buys and further stretching its financial resources.

Earlier this year, the company was forced to negotiate a waiver of certain cash-flow-to-debt ratio covenants in its credit agreement with its banks.

Without those waivers, it would have been in technical default of those covenants in the second quarter.

Additional reporting by Scott Hettrick and Susanne Ault

E-mail Paul Sweeting

Good. I hope Blockbuster dies a painful death.

Hope this is true, and hope it's the beginning of the end. I mean, Blockbuster's irrelevant to me save the fact that they occupy some prime square footage on the street level of my building, and I really think we could use a good Japanese restaurant there. Or maybe Thai.

I quit going to BBV when they upped it to $3.88 for new releases locally.

Ridiculous. Why spend $5-ish to rent a movie when you can own it for $15? Overcharging rental fees isn't going to put them back in the black, only drive people to the competition in the cities where there ARE competitors.

"I really wish there was the option for $0.99 24-hour rentals on any title. I really don't like this, $4.75 9-14day rental thing. I would rent a lot more on a $0.99 plan."

I think that is what they need to do. I know I would be back renting for .99 a day. Right now I can get DVDs from 2.99 to 4.99. So blockbuster, why would I rent when I can own for a few dollars more. If I buy anything more expensive it's because I REALLY want it.

If they went out of business the only thing I would miss would be finding OOP DVDs.

They aren't doing this to attract customers, they are doing this because they are being charged more per rental unit. Because their stock is so weak right now, they no longer have the buying power they used to have, and they are being charged more for the rental product they get.

A simplified rental and late fee plan is all the company needs, something like $1.99 for 2 days, 99 cents every day after that. The could market it like the no late fees plan, but instead as "need the movie for another day, don't worry, it's only 99 cents!". I just don't understand needing 2 week rentals for movies, it just doesn't make sense at all.

The Red Box will destroy all in it's path.

Initially, but I'm guessing you'd have stores popping up to fill that void in no time. And probably better ones, too.

Can they even do that again? They got sued for their late fee polcies before, which is why all they could do after that was charge per rental period after that.

That's actually an excellent idea! Quite brilliant actually.

Can someone forward this idea to the DOM of BB?

The only problem I have with Blockbuster closing down is everyone from that store would walk across the street to my Hollywood Video. At the moment it's pretty easy to find a movie to watch, but that could all change.

Like someone said, though, other stores would pop up. It just may take a while.

It won'r work. Think about it.

Normal customer comes in, rents movie, returns 5 days later. Rents another, returns 5 days later. Repeat.

Now you want...
Rent movie, return next day. Rent movie, return next day. etc....

This is too much work for the employees, meaning they would have to ring up more customers, check in/out more movies, and put more movies backon the shelves. Therefore they would need to hire MORE employees, and lose even MORE money. I worked for this shithole company for about 6 months and god I hope they go under. I will be there as big blue sinks into Hollywood Video/Movie Gallery

So what about people like me (although I'm at HV, not BB) who have the monthly rental plan? I pay $10 a month, and am in there just about every day exchanging movies. That's something like 12 or 15 movies a week, just from me.

How much work is it to check in a movie and then check out another? I think it takes my cashiers all of 2 min to make sure there are 6 discs in 6 boxes, check in 3, check out 3, and walk the movies to the other side of the security sensor.

The money BB would make by lowering prices and having a better selection would more than offset the costs of having a cashier check in and out more movies. Of course, BB will have to fight their tarnished image, which will never happen with just about everyone who has been burned.

That's really sad because BBV and Paramount are both owned by Viacom. If your sister company doesn't even trust you, who will?

I also agree that Red Box is signaling BBV's death. $1 a night, good selection of new releases, and you can return it to any other Red Box.

Not anymore. Viacom broke it off with BBV a while ago now. They probably would have never allowed the "end of late fees" bs either. Vicaom saw they were no longer a viable company before the end of the late fees, but I doubt that if they stayed owner of them they would have allowed them to get rid of a huge chunk of annual income with no real plan to recoup that loss.

I am betting that these conflicts with Paramount and BBV are because of the break.

Analyists are now predicting that BBV won't last until the end of the year. They had to pay cash up front for hit movies like Hitchhiker's Guide to the Galaxy and Longest Yard, greatly reducing the number of titles they would have previously secured on credit alone. They will also have to do this with Batman Begins and Revenge of the Sith. This means less than a hundred copies, even in most high traffic stores, of each title, which means less in stock, which means the big titles they thought would make them money won't make them anything at all, and should drive disgruntled customers even further away from them.

Damn, I work at Blockbuster and I had NO idea they waerehated this much by my fellow boardies...

I was just at Blockbuster and asked about 'Land of the Dead'. Indeed they are not getting it in stores due to a tiff with Universal over pre-payment. The cashier also told me that Blockbuster recently forced all stores to cut their cash-register stores to 1/2 (what they used for change) because the cash was needed to pre-purchase the movies.

He said he would not be surprised if they didn't make it past the month.

Hmmm .... I still have about $25 store credit left from the Great Trade-In - maybe it would be wise to use it now.