Blockbuster goes bye-bye: It’s all kiosks & digital now

Today Dish announced it had finally pulled the plug on Blockbuster, the struggling video rental chain that had lost $12 million for the company in 2012 and had been seeing ever-shrinking traffic as consumers migrated to digital and kiosks (a la Redbox).

It’s been two years since the satellite provider swooped in and bought the company out of bankruptcy for $234 million, which at the time it saw a potential brick and mortar channel to sell mobile video services which utilized satellite spectrum for terrestrial distribution.

Those plans broke down as the FCC dragged its feet, and over time the company closed stores as leases came up. With about 300 stores left (from close to a 1000 a couple years ago), the company is folding on its efforts.

There will be lots of postmortems about Blockbuster and the death of physical media over the next few days, and they will be, for the most part,  stating the obvious (and right) conclusion that the continual move towards digital distribution meant movie rental was a dying business, particularly the big-footprint brand of rental that Blockbuster had pioneered in the 80s and still, by and large, used today.

But in the end, I think kiosks like Red Box were just as deadly, if not more, to Blockbuster. If at any time in the past few years a consumer wanted same-day access to a new home release title and didn’t want to pay a high digital rental fee from iTunes or VOD, chances are they’d go to Redbox, not Blockbuster. While Blockbuster spent much of the mid-2000s fighting against the DVD by mail business, I’d suggest they would have been better off emulating or buying Redbox or Coinstar, its parent company.

I’m sure looking back (and looking at Coinstar’s  now Outerwall, market cap of $1.8 billion, they’d probably agree with me.

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Michael Wolf

Chief Analyst NextMarket Insights

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