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UPDATE: Dish Network “Disappointed” By Studio Efforts To Make Blockbuster Wait For Videos

UPDATE, 10:55 AM: Dish Network CEO Joe Clayton was clearly talking about Warner Bros, although he didn’t single the studio out by name in his company’s conference call with analysts. Warners wants to make Blockbuster wait 28 days for new home videos, leading the rental operation that Dish bought in April to go to the open market to buy DVDs of WB’s Horrible Bosses and Green Lantern. The studio withheld them, largely to help its efforts to promote VOD and sales of new discs that include UltraViolet’s digital streams to PCs and mobile devices.  That “creates some challenges,” Clayton says – adding that Blockbuster rentals improve promotion for films as they move to TV and other markets.

As for the main satellite video business, Clayton says: ”Progress was made in the third quarter. Was it enough? No.” He vowed to step up Dish’s marketing, which he says “needed the most work,” adding that he’s “cautiously optimistic” there’ll be progress in 4Q. Chairman Charlie Ergen said that DirecTV’s strong 3Q results last week shows that “there’s still a big business out there for satellite television on a stand-alone basis…. We’re just not getting our fair share.” Dish would consider offering less expensive video packages. Read More »

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NCR Says Blockbuster Express’ Price Increase Will “Simplify” Consumer Choices

NCR wants to sell the Blockbuster Express DVD kiosk business, but it may have to deal with some angry customers on Tuesday when it implements its 3-2-1 pricing plan. The company will continue to charge $3 for the first night to rent a DVD that’s been out 28 days or less. (Actually new movies will cost a penny more; they’re now  $2.99.) The big change involves DVDs from the 29th to the 90th day after they’ve been released: NCR is raising the first night price to $2 from $1. After 90 days the price drops to $1. In each case it costs an extra buck for each additional night. (Blu-ray discs cost $1 more than DVDs in each window.) Why is NCR making the change? It has some PR cover;  Redbox just increased its price to $1.20 from $1. And last week NCR’s John Bruno told analysts that the company is exploring “profit-enhancing initiatives including premium pricing for the new releases.” NCR also wants to keep studios happy: With its higher price, Blockbuster Express isn’t subject to the 28-day delay on new releases that Read More »

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Dish Network Delivers A Blockbuster Disappointment

Dish Unveils Blockbuster Movie Pass

What a letdown. Dish Network does the dance of the seven veils as it hints that it will take on Netflix, and the big news today is that it will re-brand Blockbuster’s existing streaming and mail-order DVD rental service — and offer it to Dish Network customers willing to pay an extra $10 a month? There’s no way around it: With Blockbuster Movie Pass, Dish just blew a golden opportunity to seize the momentum from Netflix, which is still reeling from the consumer backlash to its 60% price hike for subscribers who want to continue to stream movies and rent DVDs by mail. Blockbuster Movie Pass can stream 3,000 movies to TV sets, and 4,000 to PCs; that’s 25% or less of what Netflix offers. Read More »

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Netflix CEO Reed Hastings’ Apology Fails To Stop Stock Slide

Netflix CEO Reed Hastings had better hope that consumers are more forgiving than Wall Street. The company’s shares fell 7.4% on Monday following Hastings’ mea culpa for botching the roll out of Netflix’s decision in July to separate its streaming business from DVD rentals — he tried to gloss over the fact that it would raise prices by 60% for half of his customers, who want both. He also disclosed today that  DVDs will be handled by a new stand-alone unit called Qwikster that will begin to rent games for XBox 360, PlayStation 3, and Wii consoles. Netflix’ closing price of $143.75 is about half of what it was just before the July announcement, and down $64.96 from last Wednesday before the company said that its subscriber numbers for 3Q would be lower than it had forecast.

Savvy company watchers say they believe Hastings is scrambling to fix Netflix’ image because its board or large investors — or perhaps both — are becoming panicked. They have a lot riding on the belief that Netflix will remain the Internet’s leading alternative to cable TV and soar as broadband video becomes ubiquitous. Even after the recent drop in value,  Netflix stock trades for an extraordinary 21 times expected earnings — nearly twice the multiple for most media companies. That means most of its value comes from investors’ faith that Netflix will become far more profitable than it is now.

But Hastings’ PR blunder … Read More »

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Dish Network Will Keep 1,500 Blockbuster Stores Open

Here’s what will be left of the video rental chain that Dish Network bought for $320M. For reference, Blockbuster had 4,255 domestic stores in 2006.

MCKINNEY, Texas, July 21, 2011 – Blockbuster L.L.C. announced today it has assumed contracts with property owners nationwide and will maintain operations of more than 1,500 U.S. Blockbuster stores that would have closed under liquidation, as approved in a New York bankruptcy court this week. Blockbuster also will retain more than 15,000 store employees.

“We’re pleased that we will continue to operate more than 90 percent of the stores that were offered at auction in April,” said Michael Kelly, president of Blockbuster. “By lowering pricing and offering competitive summer promotions, we’ve brought millions of customers back into Blockbuster stores in the last three months to experience the best in convenience, choice and value. Today, more than 100 million people live near a Blockbuster store.”

Unfortunately, despite our efforts to reach reasonable terms, some property owners have closed stores,” Kelly added. “However, we’ll continue to look for opportunities for physical distribution in these neighborhoods as we expand our in-store experience, unmatched for movies and family entertainment.”

Blockbuster recently rolled out an improved Blockbuster Total Access package, which provides benefits Netflix® doesn’t offer: availability of many new releases 28 days before Netflix; unlimited in-store exchanges; games for XBOX 360®, Playstation3™, and Nintendo Wii™, and no additional charge for Blu-ray™ movies.

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Coinstar Shares -10.5% In After-Hours Trading As Redbox President Mitch Lowe Leaves For “Other Interests”

Coinstar shares are down nearly 10.5% in after-hours trading as the company coupled this surprising announcement with an early release of financial data that’s lower than Wall Street expected. The owner of the Redbox $1-a-night DVD rental kiosks says that next week it will report 2Q revenues of between $434M and $436M — below the $445.9M average forecast by analysts. Coinstar adds that earnings in the third quarter will be higher than in the fourth because the year will end with lots of DVD releases ”by studios that generate lower margins for the company.” The company also said that it has borrowed $450M in senior secured credit to repay $150M in existing debt and provide working capital.

The announcements will jolt investors who have been regaining their confidence in Coinstar after its shares plummeted 30% in January. The company startled the Street by disclosing that its financials would fall far short of its guidance. Coinstar was grappling inventory issues as several studios delayed providing DVDs to Redbox until 28 days after they were available elsewhere. Also, Redbox was slow to integrate Blu-ray discs into its kiosks. But lately Redbox seemed to be in the catbird’s seat. Blockbuster’s kiosk business is on the ropes following the chain’s bankruptcy and acquisition by Dish Network; this month NCR, which makes the machines, said it may sell the unit. And Netflix angered a lot of consumers with the recent 60% price hike for its combination DVD rental and broadband streaming … Read More »

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UPDATE: What Will TiVo Do Next? Dish Network’s $500M Payment Is ‘Far Less’ Than Expected

UPDATE-WRITETHRU: How long will it take before Wall Street’s cheers for TiVo CEO Tom Rogers turn into catcalls? The Street applauded the former lawyer and NBC cable big shot today following TiVo’s agreement to settle a seven-year patent dispute with Dish Network. TiVo shares were up 3%, to $9.86, after the satellite company’s cunning billionaire CEO Charlie Ergen agreed to pay TiVo $500 million. Dish made the payment so it could continue to provide its customers with DVRs that do things TiVo says it invented –  including record one show while users watch another. Rogers says that means TiVo can pretty much insist that every DVR provider fork over a license fee. TiVo has already charged Microsoft, Motorola, Verizon, and AT&T with patent infringement. “The precedent is set” in TiVo’s favor, Rogers says as he vows to “aggressively enforce our intellectual property” rights. But TiVo is a DVR provider, not a law firm. And its core business is growing weaker each year. It had about 2 million subscribers in January – down from its peak of 4.4 million in January 2007. It has also consistently lost money for the last two years. Rogers continued to charge hundreds of dollars for DVRs capable of integrating Web video with conventional TV shows at a time when most consumers were satisfied paying about $10 a month for the simple, if often badly designed, DVRs that their cable or satellite providers offer. Meanwhile, Rogers’ pals in the cable  industry let him down. Beginning in 2005 he cut deals with Comcast, Cox and others: They agreed to give TiVo about a buck a month for each subscriber willing to pay an additional fee to have TiVo’s user interface on their DVRs. But that strategy has been long on press releases and short on results as cable companies complained about how difficult it is to integrate TiVo software into their set-top boxes. As a result, all TiVo has are its lawsuits. It recently borrowed $150 million, mostly to ensure that it would have enough cash to keep the court battles going.

Although Ergen blinked first in his standoff with TiVo, he may have outsmarted Rogers by dragging the case out as long as he did. Bernstein Research analyst Craig Moffett says that Dish’s $500 million payment was “far less than we expected.” Dish, which has 14.2 million subscribers, no longer has to worry about a court order that would force it to turn off all of its DVRs. “That would have been a knock-out blow,” Ergen told analysts. And Dish now can count on TiVo’s help as the satellite company figures out what to do with Blockbuster, the bankrupt home video chain that Ergen just bought. TiVo is one of the few Web devices that offers its subscribers the movies that Blockbuster transmits through its video-on-demand service. “I hope we win the war, and that TiVo wins the war,” Ergen says. But investors seem more optimistic about Ergen’s prospects than they do about Rogers’. Dish shares were up nearly 19%, to $29.79 on Monday.

PREVIOUS, MONDAY AM: Dish Network CEO Charlie Ergen blinked first: The satellite company said Monday morning that it has agreed to pay TiVo $500 million to settle their long-running dispute over who controls key patents to the DVR. The agreement appears to strengthen TiVo’s hand in lawsuits against Microsoft, Motorola, Verizon and AT&T over whether DVRs that they’ve built also violate TiVo patents. TiVo says it controls the technology that enables DVRs to do things like record one show while the user watches another. But if Dish had lost its case in court, then it would have been at TiVo’s mercy: The DVR company could have demanded that Dish either pay a huge license fee, or turn off service to its customers’ DVRs.

TiVo and Dish now say that they plan to work together at Blockbuster, the bankrupt home video retailer that Dish just bought for $320 million. Although Ergen’s light on details, he says that the TiVo will “help develop our Blockbuster service.” Ergen is thought to be interested in using Blockbuster’s brand name to develop a service that would challenge Netflix in streaming movies and TV shows vis the Internet.

TiVo CEO Tom Rogers says that the agreement “demonstrates the significant return affording to our shareholders by diligent enforcement of TiVo’s  property rights. Those efforts will aggressively continue with other parties.”

There’ll be more to come: TiVo will discuss the settlement in a conference call at 9 AM ET. Dish has a scheduled call to discuss 1Q earnings at noon. Read More »

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Hollywood Could Decide Blockbuster’s Fate, Dish Network CEO Charlie Ergen Says

Dish Network CEO Charlie Ergen — once tossed out of a Las Vegas casino for card counting — was poker-faced again on Monday in discussing his plans for Blockbuster. In a conference call with analysts he wouldn’t say whether he’ll continue to rent DVDs at lots of bricks and mortar stores, or gut that business in favor of slapping the Blockbuster name on an Internet streaming service for movies and TV shows. Ergen says his plans will roll out like an episode of Seinfeld: “You’ll have to wait (for the last two minutes) to see how it all comes together,” Ergen says. “Seinfeld was a show about nothing. So this could be a strategy about nothing if you’re skeptical. But we feel we have a purpose.” Yet if Ergen has a strategy, then he contradicted himself by saying that he’ll have conversations with Hollywood studios over the next few weeks to see what they want.  “If studios want a physical (retail) presence, there’s a lot of reason to keep stores open,” he says. Blockbuster has about 1,700 stores and Dish hasn’t decided how many to shutter. The company says that only about 370 of the stores are profitable. So is Ergen leaning toward a digital strategy? Maybe, or maybe not: He says that Netflix “has a formidable and perhaps insurmountable lead” in attracting subscribers who want to stream programming to smartphones, tablet computers, and TV sets. Ergen says he likes the option of having a … Read More »

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Bankruptcy Court Approves Blockbuster Sale

Mike Fleming

Despite the objections of 111 parties including plenty of creditors, U.S. Bankruptcy Court judge Burton Lifland approved Dish Network’s $320 million offer for the beleaguered vid chain. According to Bloomberg.com, the deal assumes $11.5 million in debt to studios.

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