Blockbuster Earnings Call Notes

Earnings call webcasts are full of great information, and Blockbuster's call from earlier today is no exception. Here's my notes from the call:

Blockbuster is really cutting costs: "...trimmed annual run-rate G&A expenses by about $100 million. In fact, this quarter alone we reduced SG&A, including advertising, by $100 million during the quarter."

In-store availability of new releases has been increased from 20% to 60%.

Blockbuster CEO Jim Keyes on Total Access: "...I am pleased to report that total access subscriptions are stable at 3.1 million. The business is now profitable and we are getting back to the business of growth.

Blockbuster has a new online service in beta test, and will roll it out to all customers in June.

Movielink has more than 9,000 titles.

Blockbuster will be testing a NCR digital download kiosk next month.

Total Access grew 6.2% over last year.

Blockbuster intends to renew the war on Netflix: "We’ve got an opportunity to be much more aggressive with Netflix, much more aggressive with Game Stop, and the question is how much of our advertising will be used in that fashion."

You can read the entire transcript online at Seeking Alpha.

Comments

[MarcusM]

So much for droves of subscribers rushing to Netflix and the demise of Blockbuster.

[Brit]

Does anyone have any more information on the new service they are going to release in June?

Is it a watch now type of thing? Is it a new website design? Is it a modification of their current service?

[Frank]

A stronger BB is good for customers of both companies, competition will keep Netflix on its toes.

What's not clear is whether the investments and cost savings BB has made are as good long-term as they have been in the short term. Increasing new release availability from 20% to 60% implies significant investment, what did that investment come at the expense of? And cutting advertising improves the balance sheet short term but reduces the number of new customers who will bring in revenue in the future.

Time will tell.

@Brit:
"Our acquisition of Movielink provided both digital content and a distribution tool. Movielink integration is going well and proceeding as planned. We have a new online service in testing, in beta testing now and we are planning to make it available to all customers in June. The extensive library of over 9,000 titles gives us one of the largest digital VOD and day date electronic sell-through libraries in the marketplace."

So it sounds like instant watch, but no indication whether it's part of TA or separately priced.

[Economist]

Increasing new release availability doesn't cost as much as you might think. DVD rental operates on a cost-share basis. Therefore, the inventory is free because the studios take a cut of each rental instead of getting the per-copy cut up-front. The costs are largely in stock-keeping and distribution.

I'd like to emphasize the comment from the earnings calls: "The business is now profitable." At current subscription prices, mind you. Remember the Netflix price hike a couple of years ago, back when they had a monopoly?