In yet another vexing move by the ill-fated Blockbuster execs, the company announced today that it would be going retail and start selling video game consoles, games and accessories in all of its corporate locations. Some have said that this is a good move for the company and could jump start sales. I think it's crazy.
What is Blockbuster, exactly? Is it a rental chain? Is it a retailer? Is it both? It certainly looks like the company wants to be all things to all people, but not only is that plan foolhardy, it flies in the face of reason.
Whatever happened to the concept of a corporate identity? You know, that old idea you were probably taught in business school where your professor told you about the need for companies to find and solidify core competencies and stick to those. And once you found that, it was your job to be unique in that space and maintain a lead in the industry through price leadership or differentiation. Whatever happened to that idea? Did Blockbuster execs skip that class?
"We're committed to offering a full assortment of everything gamers want in our stores -- hardware, accessories and retail and rental games across all platforms -- including Nintendo Wii, Sony PS3, Microsoft Xbox 360 and Nintendo DS," said Rod Murray, vice-president, games merchandising, at Blockbuster.
Sorry, Rod, but I'm not getting the point. Why do you want to provide a "full assortment"? What's so wrong with sticking to your rental model and doing what you can to turn that business around?
When taken at face value, maybe Blockbuster's decision to move into retail isn't so bad. After announcing a few weeks ago that it would try to acquire Circuit City even though it didn't have the cash or financing to do it, some wondered what the future of Blockbuster would look like. With the rental business becoming more difficult each day and competitors like Netflix making the company look worse each day, something obviously must be done. So, in an attempt to increase revenue and that floundering stock price, the company obviously felt it should get into the retail game. But when you look at what's really going on, it makes no sense.
The Circuit City debacle
Can someone give me a good reason why Blockbuster would want that Circuit City dog? The company's stock price is hovering at $4.62 at the time of this writing and it incurred a loss of over $200 million in its last reported quarter. To make matters worse, it has no chance of competing with Best Buy and it's looking more and more like the junk heap of tech retail instead of a bastion for value.
Blockbuster's story isn't much different. That company's stock price is a cool $3.02 per share and although it turned a slight profit of $40 million last quarter, it did so on almost $1.6 billion in revenue. Regardless, shareholders couldn't have cared less and its stock price is still on a downward spiral -- it lost more than half its value in just one year.
But if Blockbuster can't survive in the rental space, what makes it so sure it can acquire another dog and try to survive against Best Buy in the retail space? Does it know something that both Circuit City execs and the rest of the industry doesn't? Does it have a secret formula that will allow it to beat its Web competitors?
Conclusion: Wrong move
The video game retail debacle
As if that's not enough, Blockbuster then announces that it wants to bring retail to its stores and start making video game gear available. What? Does it even realize what the competitive environment in that industry looks like?
As it stands, the company needs to compete with huge video game retailers like Wal-Mart and Target, which are closely followed by boutiques like Gamestop. To make matters worse, Blockbuster has even more major competitors online and with Amazon and the rest, it's difficult to carve out a niche in that space.
Ostensibly, Blockbuster is trying to copy the Hollywood Video tack with its own GameCrazy deal, but even that business is suspect and most prefer the others over a video game boutique that's located inside a rental chain.
Conclusion: Wrong move
Blockbuster is a movie and video game rental chain -- nothing more, nothing less. Instead of trying to sell video games, why doesn't it try to improve that facet of its business?
Blockbuster has officially lost its corporate identity and is doing what little it can to show its shareholders that it's trying to change things. But by getting into retail, its executives are showing how inept they really are. Suffice it to say that Blockbuster doesn't necessarily need to enter other industries -- it is turning a profit after all -- maybe all it needs is to find some better management.