Facing an inevitable bust?

I was a little alarmed by the comments from the head of the Australian operations of the Blockbuster video store operations this week.

In response to inquiries about the viability of the local concern in light of the likely bankruptcy of their US parent (well sort of parent – it’s pretty much an international franchising setup with the distinct Aussie entity using the US mob’s brand, systems etc), Paul Uniacke indicated (in effect) that he saw no significant threat from alternatives to his bricks and mortar operations. This is despite the US version experiencing a 16% sales drop in the last quarter.

His argument is that Aussie consumers haven’t embraced mail-order DVD delivery offerings from startup competitors, nor have they shifted to streaming/download options.

I would think the missing word there is “yet“.  Surely it is only a matter of time before wandering up to an understocked, inconvenient video store becomes as quaint and antique an idea as using a phone box or sending a telegram?

He is right that the actual decline in store-based DVD rentals hasn’t happened here yet, but I am certain growth slowed a while back, and that decline is just around the corner.

Mail order might not the threat its proponents hoped for, but streaming will be (as demonstrated already by the utilisation of illegal and legal download services).  The much vaunted upgrade in Aussie broadband infrastructure will greatly facilitate this.

The strategic lesson: just because technology and socio-cultural effects haven’t kicked in yet, don’t fob them off as irrelevant.  Learn lessons from similar and more advanced markets.

Blockbuster Australia should be looking very, very hard at web-based video delivery (although, I must say, I can’t see that much in their existing resources and capabilities that would see them out-perform Amazon, Apple or even Telstra on this front). Alternatively, they’ve got to find something interesting to do with all of the stores.

As an aside, my local Blockbuster has halved in floorspace in the past year, and still looks empty every time I walk past…

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5 Responses to “Facing an inevitable bust?”

  1. Ben Says:

    I think it’s patently obvious to most people that video stores have as much future in their current form as the horse and buggy did to personal transportation. In fact, the only way to survive is to basically throw out it’s current business model and move to a Netflix/iTunes type model … which of course is a problem given there are so many competitors in a more advanced position.

    Equally worrying for Blockbuster is that that I would imagine they are losing an entire demographic of customers. Gen X/Y are all used to downloading movies off the Net – I bet few of them step into a video store these days.

    If I was the CEO and looking for something that would buy me some breathing room, I would be opening stores in the country or in suburb with older generations/less technically advanced populations.

  2. Steve Sammartino Says:

    If I were CEO, I’d be looking for another job.

    Agree that video retailing will die. What I think they should have done was build an on line infrastructure leveraging their brand strength for when consumers do move. But it feels way too late now.

    Steve.

  3. Ian Says:

    Though I’m not Austrialian (from Canada) I can say that where I live Blockbuster’s prices and business practices are completely horrible.

    Their prices are exactly 2 and 2.5x of local stores for new and older movies respectively and the time you have to return the movies are halved. The late fees are also murderous.

    @ Ben.

    Moving video stores into older communities is really just trying to delay the inevitable.

  4. Ben Says:

    @Ian

    Yup agree that it’s a delaying move. My point was that it buys them some breathing room whilst they work out their future business model.

  5. Andre Sammartino Says:

    Seems IBIS agrees that video hire is a dying industry (projected as facing negative growth of 3% in 2010/2011):

    http://www.smartcompany.com.au/economy/20100623-the-top-five-industries-set-to-fly-and-fall-in-2010-2011.html

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