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Blockbuster's Losing Ground to Competition

Blockbuster[1] Once the hotspot for VHS and DVD rentals, Blockbuster is considering the closure of 960 stores nation wide in a regulatory filing Tuesday. Paul Bond at the Hollywood Reporter has the story.

Shutting down this greater-than-expected number of stores would save Blockbuster up to $30 million annually, but costs from pre-maturely terminating leases could equate to $60 million. This 20% reduction is partially due to the rising threat of alternate DVD rental sources such as Netflix and Redbox undercutting Blockbuster’s prices.

Also in response to kiosk and mail-order subscription rental success, movie studios such as Warner Brothers and 20th Century Fox are working to counteract a potential decline in new release sales. Home Media Magazine reports the latest.

Warner Home Video announced mid-August that come October, the studio will only sell directly to DVD vendors with a hold of 28 days post-release to services like Redbox and Netflix. Alternate arrangements could be considered if kiosk and mail-order vendors are willing to share revenue with the studio.

Similarly, 20th Century Fox imposed these regulations, causing Redbox to sue. Redbox claimed, as reported by the L.A. Times, that Fox wants to eliminate the competition in the newly-released DVD market. 

Cutting deals is not unheard of what with Sony Pictures standing to gain $460 million over the course of a 5-year agreement with Redbox. The L.A. Times underscores the importance of Sony running with Redbox’s success.

As such, should Blockbuster increase the number of similar DVD-rental kiosks from 500 to 10,000 by next year, expected revenue would put the vendor back at the top of its game.

--Alexis Brown

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