Monday, April 18, 2005

What should Blockbuster do?

What should Blockbuster do? [WSJ]

It's a familiar situation: a once-dominant business generating lots of cash whose market is slowly dying. Other companies facing the same situation include Time Warner Inc.'s America Online Internet service and Eastman Kodak Co.'s traditional film business. In all cases, the quandary is the same. Should management use the cash generated by the existing but doomed business to diversify into something new but risky? Or should it preserve cash and return it to shareholders, such as through higher dividends, and wring as much value as possible out of the final days?

Mr. Antioco[, Blockbuster's CEO,] argues that Blockbuster has no choice but to try to reinvent itself. He says any attempt to simply milk the cash from Blockbuster's traditional rental business won't work for very long. He estimates that the market for renting videos in stores is down 17% since 2001 and could decline 3% a year for at least the next three years.

I have to agree with Antioco. Maybe its a risky, but he has an opportunity to turn around the business and create something new.

There is a paradigm shift occurring in content delivery.. but who has the answer? Is it going to be VOD via cable, video through Google or are the RBOC's going to team up with the birds to come up with an offering?

Its a battle for the money of the couch potatoes!

The only certain winner is the consumer...