What Is the Future of Blockbuster?

Shareholders angry over stock delisting

By Scott Gordon
|  Friday, Jul 9, 2010  |  Updated 11:19 PM CDT
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Blockbuster Searches for Its Hollywood Ending


Dallas-based Blockbuster is struggling to adapt to the new movie market landscape.

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Blockbuster Searches for Its Hollywood Ending

The Dallas-based company is struggling to adapt to the new movie rental landscape.
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Angry over the delisting of Blockbuster stock, a major group of shareholders is calling for an emergency meeting, raising questions about the future of the video-rental giant.

The made the request in a letter to Jim Keyes, Blockbuster’s top executive, but the Dallas-based company had no immediate response to the letter.

The New York Stock Exchange delisted the company after its average stock price fell below $1 for more than a month.

For 20 years, Blockbuster wrote the script in the video rental business. But over the last decade, analysts say, the old model changed -- with movies now delivered on-demand, over the Internet or by cable and satellite TV providers.

"There are so many pipelines going into houses these days, Blockbuster and everyone else has to figure out how to plug into that pipeline,” said Mike Davis, a professor at Southern Methodist University's Cox Business School.

Keyes admitted in a recent interview that the company hasn't adapted fast enough.

“We were a little slow to change, but we’re here to fix that,” he said.

It will be a challenge, analysts agree.

The company's stock is now selling over the counter for as low as 12 cents per share.

But Blockbuster isn't sitting still. It's closing old-fashioned stores, installing new kiosks and diving into digital delivery.

It’s also taking on one of its biggest competitors, Netflix, with a movie-by-mail service.

“Blockbuster is not about the physical store,” Keyes said. “That’s not who we are.”

Analysts say if Blockbuster can survive, its success will be a test of how quickly it can reinvent itself and adopt changing technology.

Davis said Blockbuster is still a solid brand and shares many of the same challenges with its competitors.

"Blockbuster is, or was at least, a very well-run company,” Davis said. “But the problem is they're in a market where things change so fast and so unpredictably that they have to remake themselves every few years."

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