What's Blockbuster's Fate?

The novelty of Blockbuster is quickly fading. As with all things that fall under the claws of the Internet, DVD downloads and movie rental transactions, are now by far easier to do over the Internet as opposed to going to stores such as Blockbuster or Hollywood Video. In fact, one wonders if bricks and mortar video rental locations will even continue to be relevant and survive in a world where the convenience of the Internet is far reaching when it comes to all aspects of life.

At the end of February, Blockbuster executives announced a 28 percent decline in fourth quarter earnings. However, much of this decline was attributed to the cost of starting and promoting the company's new online rental service. In addition, the company has been in a dispute with its chairman and chief executive John F. Antioco over Antioco's 2006 bonus.

None of this is really relevant however, other than the company's attempt to keep up with the Internet generation via it's new online rental options. The question is whether customers will bite this bait considering we already have rental services such as Netflix not to mention Wal-Mart began offering downloads on its website. In addition, the novelty of walking into a rental store and picking a movie is not as convenient as staying at home and doing everything online.

In addition, with the price of DVDs so low, it's easier to walk into a Best Buy, purchase a DVD with all of the other electronics accessories you need at the store and be done with everything in one trip. The question is whether customers really care to subscribe to the Total Access online program from Blockbuster.

The company is banking on it as it expects 3 million subscribers by the end of March, but there are several problems with Blockbuster to begin with, that make it hard to believe the online program will lead to boosting the company's standing as the go-to for DVD rentals and purchases.

To start with, Blockbuster lacks the selection of DVD titles that can be found at a store such as Wal-Mart or a competitor such as Hollywood Video. As a result, many people do not trust the Blockbuster name for older titles or anything outside of the "New Release" section.

Second, the average cost of one video rental is somewhere around $4 for as long as a week. This is expensive in two ways. First, people don't want to pay $4 for a movie they can't keep when you can just wait until Wal-Mart, Best Buy or Target places the movie in their bargain bins. Second, it's expensive in that people are forking over their time to have to drop the video back off, which is a bit of an annoyance in the average person's daily list of things to do.

Another reason, the online program may not work for the company is that, teens and twenty-somethings have sites such as YouTube and MySpace where videos created by the average joe catch on (sometimes) quicker than supposed "blockbuster" movies. In fact, the web is becoming the one media channel that dictates what is popular in pop culture today.

For now, it will just be a waiting game to see how well this catches on, but Blockbuster will have to continue to stay ahead of the technology game and be more innovative if it wants to reclaim its stake in the movie/game rental industry.