Where Is Blockbuster Headed?

Netflix is off to see to Oz (see yesterday’s post), but where is Blockbuster headed? The company has announced plans to close up to 960 neighborhood stores and install thousands of kiosks (presumably in an attempt to cut costs and compete with Redbox). But wait, it is has an online rental service that can stream movies to customers, which has more current titles but costs more than the “all you can eat” offering from Netflix to its subscribers.

And now Blockbuster has headed off in yet another direction. The company announced last Monday that it was forming “strategic alliances” with two cable companies: Suddenlink and Mediacom. These two will start offering Blockbuster-labeled video on demand services to customers in test markets, and Blockbuster will promote these offerings at their stores and kiosks. The curious detail is that Blockbuster is not providing the video on demand service; that’s being done by third-party Avail-TVN. Essentially, the cable companies are just putting the Blockbuster brand on this service. According to company’s press release, the hope is that customers will turn to Blockbuster to get a movie if it’s not available on the Avail-TVN service.

This is an interesting program, but I’m not sure that it will serve Blockbuster well. Trying to use new delivery systems to keep feeding traffic to the old (and possibly failing) models of storefront and postal service DVD rentals does not strike me as a winning strategy. It feels as though Blockbuster is getting squeezed hard between Netflix and Redbox, and it’s looking anywhere it can to find a competitive strategy that might work.