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Circuit City is Gone; Wattles Remains

March 19, 2009 | Author: Ibex Marketing

Investor Mark Wattles bought a sizable portion of Circuit City, and tried to influence the company’s direction. One of those steps included lobbying to support Blockbuster’s abortive effort to buy Circuit City last year. There’s a little irony here because Wattles founded Hollywood Video, one of Blockbuster’s competitors, and the sale of that chain to Movie Gallery gave him the resources to fund his investments.

Circuit City has finally closed its doors, and Wattles has returned to the video rental market by buying up nearly 6% of Blockbuster’s stock. This could be viewed as leaving the frying pan for the fire, as Blockbuster faces the expiration of two major credit lines in August of this year. Wattles is betting that the company will be able to find new sources of credit in time.

The fact remains that the transition to electronic delivery of rental movies has already started, and there is clearly pent-up demand among consumers for this type of service. Blockbuster’s major rival, Netflix, is already way out in front in this area, and Blockbuster is going to need a lot of money and some new ideas if they are to catch up. There may be room for both companies in the future, but if only one is left standing, Netflix is the most likely winner.