Warner Bros and Dish Network’s Blockbuster are at odds over a rental-release window for the studio’s films, and now Warners has stopped giving Blockbuster its latest releases. According to the Financial Times, the retailer is refusing Warner Bros’ request to adhere to a 28-day window between films going on sale and their availability for rent, and has purchased films like Horrible Bosses and Green Lantern on the open market to make them available in stores. Those two titles are the first to be released by the studio on the UltraViolet service, which allows playback on multiple devices, so it’s no coincidence that Warners wants to protect its ability to add value in the sale window via such initiatives in the face of declining DVD revenues (see Will ‘Horrible Bosses’ In UltraViolet Begin A Turnaround For Home Video?). “The question is: how do we make ownership more valuable and attractive?” Warner Bros Home Entertainment president Kevin Tsujihara told the FT. “We have started the process of creating a window in bricks-and-mortar DVD and Blu-ray rental.” He added: “(Blockbuster) felt it was important to continue to offer day and date rental, so rather than work with us they went around us.” And watch out, Netflix and Redbox: Tsujihara also said Warner Bros planned to put the same pressure on you, too. “The Netflix and Redbox deals are …
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.
Netflix CFO David Wells acknowledged today that “we’re a more humble team” following the consumer and investor backlash from a series of PR blunders. The company plans to ”step back and look at all options and what we’ll do going forward” to satisfy consumers who were angered in July when the company said it would split its video streaming and DVD rental services — increasing prices by 60% for those who wanted to continue to have both. Lowering the price doesn’t seem to be on the table. That’s “a little bit like kicking the can down the road,” Wells said at the Goldman Sachs Communicopia Conference. “I don’t think it’s going to win back the customers we lost.” Instead, Netflix likely will secure more content and “repair that trust with the consumer over time.” Defections spiked shortly after the announcement, “but it went to zero shortly afterward.” The recent decision to rebrand the DVD business as Qwikster ”introduced additional volatility into the consumer picture.” But the decision to have Qwikster also rent video games is “a signal that we’re continuing to invest and not abandon that consumer.”
UPDATE, 5:25PM: Dish Network is one of three remaining bidders for streaming video website Hulu, along with Amazon and Yahoo, an insider told The Financial Times today. The bids for Hulu reportedly are in the $1.5B-$2B range.
PREVIOUS: Just as Netflix’s price increase takes effect, Dish Network is setting up a streaming movie service for Blockbuster, Bloomberg reports. The move was hinted at last week when the satellite TV provider formally asked the government for permission to offer mobile high-speed Internet service. Dish’s Blockbuster streaming also is expected to land a content deal with Starz, which ended talks with Netflix yesterday. Some analysts, though, have suggested that was a negotiating ploy by Starz and that talks could resume. Since buying Blockbuster earlier this year, Dish has promoted the rental giant by offering three months of free DVD-by-mail for new Dish customers, and committed to keeping 1,500 of its stores open. Netflix’s new pricing plans for streaming-plus-DVD sparked a customer backlash and an attempt by Blockbuster to lure away Netflix customers unhappy with the change.
Dallas, TX (August 18, 2011) — Rave Cinemas, LLC (“Rave”) today announced that John F. Antioco, a Director of Rave and the former Chairman and Chief Executive Officer of Blockbuster Inc., will succeed Charles B. Moss, Jr. as Rave’s Chairman. Mr. Moss will remain as the second-largest investor in the company and a member of the board of directors. The leadership change will take place at the meeting of the board of directors on September 19, 2011.
UPDATE, 11:00 AM: No Charlie Ergen on today’s earnings call. But Dish Network’s new CEO Joe Clayton did an admirable job of playing cat-and-mouse with analysts who want to know whether the company will use Blockbuster and the wireless spectrum it’s acquiring to create a mega-video streaming service that wouldn’t have to go through cable’s broadband pipes. “We will be somewhat nebulous,” Clayton said. “We will not tip our hand.” Still he offered clues that suggest something big is afoot. With its recent deals Dish is “systematically developing the building blocks” for its new initiative. “Video is our primary objective,” he says adding that it’s “extremely important to us” for consumers to have a broadband-connected set top box. He says the company’s considering additional acquisitions, partnerships and asset sales. Dish also is talking with Hollywood studios about different licensing arrangements for Blockbuster that could include subscription VOD. “We’ll look at it on a case-by-case basis for each studio,” says Tom Cullen, who’s in charge of business development. In any event, Dish doesn’t plan to unveil anything soon: It will wait until federal officials approve some of its spectrum acquisitions.
As for Dish’s satellite TV business, Clayton says “it has underperformed.” The company may have tried too hard to cut back on subscribers with so-so credit who might stop paying their bills. “I’m looking for a better class of customer,” Clayton says. A big part of his strategy …
A spokesman for DEG: The Digital Entertainment Group says the trade organization didn’t deliberately choose a Friday afternoon to release its dreary new report about consumer spending on home entertainment in the first half of 2011. But from a PR perspective it probably doesn’t hurt to bury news that shows VOD and electronic distribution still can’t make up for the collapse in sales of DVDs. The headline number is that consumer spending on all forms of home video — including DVD and Blu-ray disc sales and rentals, VOD, and online — fell 5.1% vs the first half of 2010 to $8.3B. Last year, spending fell 3.3% in the first half of 2010. DEG says this year’s drop isn’t so bad because last year included Avatar. (It seems that the blockbuster was good enough to include last year when it made sales look strong, but is supposed to be treated as an anomaly now that it makes comparisons look weak.) Still, there’s no getting around the steep decline for DVDs. Consumers bought nearly $3.9B worth of DVD and Blu-ray content, down 18.3% vs the first half of 2010. At this time last year, disc sales were off 7.1% vs. 2009. DVDs are the culprit: Although DEG only reports figures for “packaged goods,” it notes that Blu-ray sales are up more than 10%.
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.
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 …
UPDATE: Netflix Shares Close -4.1% After Price-Hike Backlash; Blockbuster Offers Deal To Lure Rival’s Angry Subscribers
UPDATE: 12:00 PM: Rival Blockbuster has just pounced on Netflix’s public relations problem, announcing that it is launching a nationwide promotion in which existing Netflix customers who switch to one of Blockbuster’s two Total Access plans (1 disc at a time for $9.99 a month or 2 discs at a time for $14.99 a month) will receive a 30-day free trial. The company, which recently was purchased at a bankruptcy auction by Dish Network, said that besides a lower price it offers benefits Netflix doesn’t: availability of many new releases 28 days before Netflix, unlimited in-store exchanges, video game rentals and no extra charge for Blu-ray movies. “Blockbuster quickly responded to the cries of Netflix customers,” Blockbuster president Michael Kelly said in the release announcing the promotion. “Blockbuster Total Access is Netflix ‘without the wait.’ The combination of DVDs by mail and unlimited in-store exchanges provides more than 100 million people living near Blockbuster stores immediate convenience and unparalleled choice.” The offer is good through Sept. 15; Netflix customers can go to Blockbuster’s website to enroll or show a red Netflix envelope at a Blockbuster store.
PREVIOUS, 10:11 AM: It’s shocking to see how badly Netflix appears to have underestimated the general confusion and anger that has followed the announcement on Tuesday that it’s raising by 60% the price of its combo DVD-by-mail rental and video-streaming service. More than 5,000 mostly furious customers responded to the Netflix blog post unveiling what BTIG analyst Richard Greenfield calls “perhaps the boldest single move in (Netflix) history.” And Netflix shares are down about 3.6% in midday trading as Wall Street wonders whether the company raised prices enough to cover revenue it will lose from people who cancel the service. Lazard Capital Markets’ Barton Crockett says that “few will pay the jarringly higher price” for the streaming and DVD combo plan and “most will move to (Netflix’s) cheaper streaming-only” service. Netflix could lose some of its most profitable customers — the ones who pay the monthly fee for DVD rentals but don’t bother to order many discs. Merriman Capital’s Eric Wold says he “would not be surprised” if many of those subscribers bailed on Netflix to rent DVDs from Redbox’s $1-a-night kiosks. But Goldman Sachs’ Ingrid Chung says Netflix will probably come out ahead: The company makes a much higher profit from streaming than it does from DVD rental, and “a very high number of subs would have to churn off to offset the pricing increase.”
Many have been wondering just exactly what Dish Network would do with Blockbuster after it won an auction for the bankrupt video-store chain in April. Heck, even now-outgoing CEO Charlie Ergen was cryptic about Dish’s plan during an analyst conference call earlier this month, evading questions and saying 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.” OK, so today came the cold open: Dish announced that it will offer the Blockbuster By Mail service free for three months to new Dish Network satellite TV customers. The DVD-by-mail service, which was started by Blockbuster to fight then-upstart Netflix, offers unlimited access to more than 100,000 movies, TV shows and games — and new titles 28 days before Netflix or Redbox. The service also allows customers to return DVDs to Blockbuster stores (insert joke here about finding one that’s not boarded up) rather than via U.S. Mail. “Dish Network now offers more than twice as many movie choices as any other TV provider,” said Ira Bahr, Dish’s Chief Marketing Officer. ”If you love movies, you’re going to love Dish Network.
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 …
Dish Network has taken another swipe at Netflix with the announcement today that it has partnered with HBO and Cinemax to give its subscribers access to HBO Go and Max Go — premium-channel content that isn’t available on Netflix’s streaming service. Dish customers who subscribe to HBO or Cinemax can instantly watch nearly all of the premium channels’ programming at DishOnline.com, including movies like Avatar. It’s the latest play by the satellite company, which is finalizing its acquisition of bankrupt video-rental chain Blockbuster, a deal that is expected to help Dish compete against Netflix. The sale was supposed to close as early as today, but Dish wants more time to decide which store leases to keep.
Dish Network has revealed in filings with the U.S. Bankruptcy Court in New York that it will assume the leases on more than 500 Blockbuster stores, meaning the retailer will remain a bricks-and-mortar business at least in some capacity, the Wall Street Journal reported today. Dish has been mostly mum on what it will do with Blockbuster since winning an auction for the failed move-rental chain earlier this month, though it is widely believed that Charlie Ergen’s satellite company will use the Blockbuster brand to develop a digital service to rival Netflix, the company responsible for taking down Blockbuster in the first place. In the meantime, Blockbuster has been shuttering stores like crazy during the past few months. Dish’s acquisition is expected to close before the May 5 deadline agreed upon under terms of its winning bid at auction.
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.
The Blockbuster video chain slogan “Make it a Blockbuster night” hasn’t been relevant in a long time. But it was apt last night. Bidders battled through the evening to capture the distressed asset before Dish Network closed a deal worth $320 million at around 3 AM East Coast time. That bested rival offers that included one from Carl Icahn. The deal has to pass bankruptcy muster, but the bid includes $228 million in cash, which at least gives studios a chance to recoup some of the money owed for past merchandise shipments. Can Dish figure out a way to capitalize on a once mighty brand? I can remember standing in long lines on a Friday to rent a movie, and enduring exorbitant late charges because Blockbuster had more copies than rental store on the hot movie you wanted to see. But with the $1 Redbox option available in kiosks at every supermarket, and Netflix’s painless streaming program and mail rental system, can anyone remember the last time they even stepped foot in a Blockbuster store? Blockbuster’s brick and mortar strategy was exposed as a dinosaur strategy when those other services began to rise, and the behemoth moved too slowly to adapt to the times and protect its turf. Here is the official statement from Dish:
UPDATE, 2 PM: An investor group led by Carl Icahn made a leading bid of $310.6M for Blockbuster today in U.S Bankruptcy Court in New York, topping a $307.1M bid by Dish Network, Bloomberg is reporting. Icahn attended the auction but did not say what he’d do with the movie-rental chain if he acquired it, though the bidders were a mix of liquidators and companies who want to keep Blockbuster a going concern, like SK Telecom. The South Korea company has bid $284.5M, which it said is better than other offers because it covers more costs and liabilities. A sale-approval hearing is set for Thursday.
PREVIOUS, 8:23 AM: Dish Network has made the highest bid for Blockbuster ahead of an auction today for the bankrupt movie-rental chain, Bloomberg reports. A lawyer involved in the proceedings said a group led by Carl Icahn made the second-highest bid. More as the story develops.
Amid reports today in the Wall Street Journal that investor Carl Icahn and Dish Network, and even South Korean company SK Telecom, are reportedly preparing bids for Blockbuster ahead of its auction Monday, creditors like Microsoft, Yahoo and T-Mobile are worried that whomever buys the bankrupt movie-rental retailer won’t be able to settle its debt to them. Bloomberg reported today that more than 50 such creditors have filed objections to a sale in U.S. Bankruptcy Court. These are apart from the larger creditors, like Hollywood studios, who agreed to a deal earlier this month that allowed the auction process to move forward. That bidding process is designed to eclipse a $290M “stalking horse” offer by a venture group led by Monarch Capital.
The Wall Street Journal is saying that the revamped Miramax is in discussions with Netflix on a five-year, approximately $100 million deal to add the studio’s content to Netflix’s streaming service. That would give Netflix a 700-plus-title library to add to its catalog, which deflated slightly this week when Starz imposed a 90-day delay on streaming titles and Showtime said it won’t make its original series available when the companies re-up their contract in the summer. For Miramax, the negotiations are the latest part of a plan to monetize its library since the studio was purchased from Disney last year by Ron Tutor and Tom Barrack’s Filmyard Holdings. In February, Miramax signed a DVD deal with Echo Bridge for domestic distribution.
As for Blockbuster, the bankrupt bricks-and-mortar DVD retailer (ah, remember when Netflix was Blockbuster’s rival, and not the other way around?) has said in court filings that it wants dump leases on 187 of its stores ahead of an April 4 auction, impacting locations in 30 states. Bloomberg said such moves usually mean a retailer plans to close the stores or attempt to renegotiate their rents.