Saturday, November 3, 2007

is this the end for Blockbuster ??

Blockbuster's Net Loss WidensAs Company Plans Job Cuts
By KATHY SHWIFFNovember 1, 2007 10:40 a.m.

Blockbuster Inc.'s third-quarter net loss widened amid its battle with Netflix Inc., and the video-rental chain announced job cuts aimed at moving Blockbuster back to profitability.

Dallas-based Blockbuster reported a net loss of $35 million, or 20 cents a share, compared with a year-earlier net loss of $24.7 million, or 15 cents a share. The latest quarter's results included five cents a share in restructuring-related costs. Revenue dropped 5.7% to $1.24 billion.
Analysts' mean estimates were for a loss of 18 cents on revenue of $1.28 billion, according to a poll by Thomson Financial.

The gross margin fell to 53.9% from 56.6%. Same-store revenue rose 3.5%, rising 1.4% domestically and 8.4% internationally.

Blockbuster has been closing stores; in July, it said it plans to test smaller stores, featuring new and popular titles, in U.S. urban markets.

The company said Thursday that management has completed a preliminary review of Blockbuster's cost structure and has started a plan to cut annual overhead costs by some $45 million a year. A precise number of job cuts wasn't disclosed.

The cost-cutting comes as Blockbuster continues to struggle against competitors, such as Netflix, and the increasing popularity of video-on-demand service from cable operators as well as movie downloads.

Last month, Netflix reported that third-quarter net income jumped 23% on strong subscriber growth. Netflix said it expected to have 7.3 million to 7.5 million subscribers by the end of 2007 and raised its 2007 revenue forecast to $1.2 billion to $1.21 billion.

Blockbuster's online subscribership reached 3.1 million as of Sept. 30, but the company said it would no longer focus on that number as it cuts advertising and promotion of its year-old Total Access plan. Total Access lets online customers return DVDs through the mail or redeem them at a store for free movie rentals. The plan attracted many customers but boosted Blockbuster's costs.

Chief Executive Jim Keyes said, "Our goal is to continue to increase our membership base by providing even more ways for customers to get the entertainment they want through our stores, through the mail and through new technologies."

In May, Blockbuster sold Games Station Ltd., its 217-store specialty-games retailer in the U.K., to Game Group PLC, a European video-game retailer, for about $150 million.

In August, Blockbuster bought MovieLink LLC, a service that allows consumers to download films from the Internet, for undisclosed terms. Last week, it said MovieLink has received a letter from its independent auditor citing substantial doubt about its ability to continue as a going concern.

source [WSJ]

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