Blockbuster Sued; Sells Rhino

Blockbuster is being sued by one of the first franchise owners over the Blockbuster Online Total Access service and "No More Late Fees" promotion.

But Southern Stores Video Inc., Montesi's local company that pays Dallas-based Blockbuster Inc. $2 million a year under an exclusive license agreement, now is embroiled in a legal dispute with the video rental giant. A partnership representing Southern Stores has filed suit in federal court claiming that because Blockbuster now allows customers to buy and rent videos online, the group's local franchise agreement has been undercut.

Approximately 1,000 of the 8,500 domestic Blockbuster stores are franchises, and they are strugggling with the changes in the industry, and the changes in Blockbuster's strategy. My local Blockbuster franchise participates in the Total Access program, but still charges a modest late fee (they offered "No More Late Fees" for 30 days during the launch of the program).

In other news, Blockbuster has sold 72 Rhino Video Game stores to GameStop.

Comments

[gir]

Ah! Another law suit. How refreshing.

I have to admit though, I can see their point.

I wonder why Southern isn't participating in Total Access. Is it just because they already opted out of 'no late fees'?

[eazyguy52]

I could smell this one coming. I'm no financial whiz kid but one could see where Blockbuster is certainly putting it's franchised dealers in a bind. I mean here they are paying Blockbuster 2 million a year and they aren't going to get a whole lot in return especially if they participate in Total Access.

Look at it this way: if they participate, they get no rental income from people trading in DVD's they rented on-line. If they don't participate they get a lot of ticked off customers as the article states. It's a loose loose situation. I'd have to wonder how big of a hit the franchise stores (like yours) who are participating are taking off of this deal. When the bricks and mortars start closing, the franchise dealers left out in the cold to fend for themselves will be the first to go.

[type-cast]

Maybe Blockbuster's trying to get rid of the dead weight franchises, which drag them down and prevent the implementation of store-wide policies. Thankfully, none of my BlockBuster Stores are franchises. I think most of their stores are corporate, like 2/3rds or 3/4ths. It's hard to feel any sympathy for franchise stores when they often refuse to honor Total Access, free game rentals, and new releases. What do they expect, but customer back-lash?

[type-cast]

"Approximately 1,000 of the 8,500 domestic Blockbuster stores are franchises,"

According to the first link you posted, they only had about 5700 stores a year ago. I can not believe they added almost 3000 stores in one year. Please check your source, Mike.

"As of Dec. 31, 2005, 4,617 Blockbuster-owned stores and 1,079 franchise-run Stores operated in the United States,"

[Bulldozza]

Agreed. This could get interesting. Someone who buys a franchise does not expect the parent company to launch a product (online rentals) that competes directly with the franchise product. Blockbuster may be forced to buy out its franchisees right at the time storefrontss are in the death spiral.

[Edward R Murrow]

These aren't stores - they are shipping and receiving centers.

[Mike_K]

The whole situation is insane, Total access is a loss leader and the ones that try make a profit in the whole company are taking the fall.

They are really burning the Rome and it has started in the urban provinces.

[Edward R Murrow]

I would urge folks to take a look at the 2 week charts for BBI and NFLX. The Street loves what Blockbuster is doing. Once you've looked at the charts, then take a look at the stock sell-off going on here:
http://www.form4oracle.com/company?cik=0001065280&ticker=nflx

We should all have access to the same information.

[type-cast]

"The whole situation is insane, Total access is a loss leader and the ones that try make a profit in the whole company are taking the fall."

Bad grammar and bad arguments. Also, "mikek" isn't the same ID as "Mike_K". There are 72 Google hits for "by:mikek" and only 11 hits for "by:mike_k". Are they the same person or someone spoofing the site owner's identity? Hard to say. Every company has loss leaders. Best Buy, Target, Circuit City, and Wal-Mart have them alll the time. What's your point?

[type-cast]

"Someone who buys a franchise does not expect the parent company to launch a product (online rentals) that competes directly with the franchise product."

It's simple to argue that it doesn't compete directly against the franchise product. NFLX fans argue all the time that they don't want to go to the stores. They argue that people who rent online don't want to rent from the stores. Nobody is forcing the franchisees to pay $2 million a year. Let them start their own chain. Take down the Blockbuster sign if they don't like it. I would suspect that if they did so, they would lose at least $2 mil in business. Otherwise, it would be totally irrational for them to pay the $2 million in the first place.

[Mike_K]

"Bad grammar and bad arguments. Also, "mikek" isn't the same ID as "Mike_K". There are 72 Google hits for "by:mikek" and only 11 hits for "by:mike_k". Are they the same person or someone spoofing the site owner's identity? Hard to say. "

I have never claimed to be Mike Kaltschnee, the owner of this site. It just happens that my name is Mike and my surname starts with K.

So I don't know where your drivel is coming from type-cast.

Grammar is bad? Who cares it's a blog?

"Every company has loss leaders. Best Buy, Target, Circuit City, and Wal-Mart have them alll the time. What's your point?"

Bad ^^ grammar there type-cast.

The above companies are not killing their core business with loss leaders, but in fact use them as demand creators that benefit the business more than damage it.

I know you will start to whine again about this, so let's get back to this point when BBI releases it's numbers so we have latest facts.