Blockbuster is expected to shutter at least 1,000 of its 3,000 stores in a “Pre-Arranged” Chapter 11 Proceeding. The plan to turn the company around, led by billionaire investor Carl C. Icahn, is to move to on-demand movies delivered through cable services and the Internet. The single advantage the company hopes to cash in on is that it can deliver some movie titles on the day they are released. Competitors like Netflix and Redbox have to wait 28 days.
But Apple and Amazon also offer digital downloads. They’re not subject to the 28-day window, they’re savvy online retailers and it’s the online delivery of movies that killed Blockbuster:
Netflix had been successful with its DVD-by-mail service, but never has it been more successful than with the expansion of its streaming video service. Over the past year alone, its subscriber numbers have grown more than 40 percent, driven primarily by users that have logged into its streaming service. Now, more than 60 percent of subscribers have streamed Netflix content to their PCs and other connected devices.
For its part, Netflix CEO Reed Hastings announced a subscription-based, streaming video service for Canadians yesterday that costs $7.99 CAD ($7.80 USD) per month. The announcement was badly bungled. First came the apology for using actors to bulk up the crowd at the splashy launch on a closed Toronto street. Netflix claimed the actors were hired to help with a corporate video and they got carried away.
Then, came this exhange with The Hollywood Reporter:
THR: American services when they enter the Canadian market typically charge the locals more than they charge stateside. Why the discount for Canadians?
Hastings: We want to provide an incredible value for Canadians, and it’s the lowest price we have anywhere in the world for unlimited screenings. And anyone can try it for free for a month. It’s pretty addictive.
THR: Are you concerned that American Netflix subscribers will look north and ask for the same discount Canadians get at $7.99?
Hastings: How much has it been your experience that Americans follow what happens in the world? It’s something we’ll monitor, but Americans are somewhat self-absorbed.
Yikes! Not so much the politician there, is he? In his apology for that, posted just a short while ago, Hastings writes:
The pricing Netflix is offering in Canada, $7.99 per month, does not include any DVD-by-mail option, and that is why it is cheaper than our $8.99 USA plan which has both DVD-by-mail and streaming in one plan. We are looking at adding a streaming-only option for the USA over the coming months.
Emphasis mine. (And I’m not alone.)
The PR hiccups haven’t hurt the Netflix stock price. It went up 6% yesterday in anticipation of the Blockbuster bankruptcy and hit an all-time high today.
Meanwhile, Stephen Lubben points out that one consequence of the Blockbuster bankruptcy is yet another hit to the commercial real estate market:
Although Blockbuster has yet to make clear its plans with regard to store closings, one of the crucial benefits of Chapter 11, as contrasted with an out-of-court restructuring, is the ability to terminate leases and cap the damages owed to landlords because of the termination. For a market already hit by several prior Chapter 11 cases — how many of you live near an empty Hollywood Video or Linens ’n Things stores? — the closure of underperforming Blockbuster stores will mean even more empty stores fighting for tenants.
The Big Picture is crowdquerying whose next to go bankrupt. Not much of interest yet in the 67 comments there. But at GigaOM Michael Wolf asks Will All Brick & Mortar Media Sink Like Blockbuster? And answers that he thinks Barnes & Noble will see “significant challenges in coming years.”