Antioco: Big Blue pull-back not over
Also seems to hint at return of late fees
By Paul Sweeting 1/10/2006
JAN. 10 | Blockbuster chairman-CEO John Antioco said Tuesday that 2006 could bring further retrenchment as the rental giant tries to find its feet after staggering through 2005.

Speaking at Citigroup’s annual Entertainment, Media and Telecommunications conference in Phoenix, Antioco predicted an industrywide decline in the number of video stores this year, including Blockbuster stores, and hinted Big Blue might look for ways to restore the revenue it lost by eliminating late fees.

“When we modeled No Late Fees, we assumed we’d see an uptick in in-store rental activity, and we’ve seen that uptick, but it has not been quite as large as we expected,” he said. “We thought it would be around 8%, and we didn’t quite get there.”

Though Antioco said he still believes eliminating late fees will pay off for the chain by 2007, he added: “Nothing prevents us from reinstating late fees, or taking some price increases, or raising re-stocking fees. There are a lot of things we could do if we have to, but right now, we think we have a competitive advantage.”

That competitive advantage won’t spare Blockbuster from further cutbacks, however.

“I think all players in the industry, whether they’re independents or Blockbuster or Movie Gallery will have to take a look at their store portfolios,” the Blockbuster chief said. “Overall, I would expect a 10% to 15% decline in store capacity industrywide over the next three years. I don’t think Blockbuster’s rate will be that high, but we will be increasing the net number of stores we close over the next few years.”

Antioco said the cutbacks would ultimately improve Blockbuster’s rental comps.

“I would hope that the rate of capacity shrinkage will be greater than the decline in the overall business, and that will be good for comp-store profitability,” he said.

As for his own fate at the company and his relationship with Carl Icahn, the financier who engineered Antioco’s ouster from the board last year only to re-instate him, Antioco was circumspect.

“If the question is what Carl will do in this round of board votes, which I think he has to figure out by February, the answer is I wouldn’t speculate,” Antioco said.

Icahn controls two seats on the board after winning a proxy fight against management last April.

Under Blockbuster’s staggered directors’ terms, Icahn could conceivably gain control of the board by running another slate of candidates this year.