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Netflix

Circuit City + Blockbuster = Circuitbuster?

By business, news, opinion

News has just surfaced in the past couple of days that struggling movie rental company Blockbuster has offered a billion dollars to buy out similarly struggling electronics retailer Circuit City, based here in Richmond.

Blockbuster executives claim it would uniquely position Circuit City, the number two electronics retailer in the United States, to have a more competitive retail concept. How? By pairing electronics and end-user content together, similar to the way the Apple Store does.

But on a personal note, I don’t know how Blockbuster can afford such a deal, seeing how much of a hit they’ve taken in the past few years with rivals such as Netflix undermining their business (although they do have their own service, Blockbuster Online, of which I’m a customer, and it’s better than Netflix if you ask me because you have the option of instant in-store exchange).

In my opinion, bringing these two companies together seems comparable to raising a flag on not just one sinking ship, but two. I’ll be really interested to see what happens if the deal ends up going through.

“Blockbuster Stumbles On Hostile Takeover” – via Business Week

Shares of Blockbuster Inc. plunged to an all-time low Monday after it announced a $1 billion-plus hostile takeover bid for No. 2 electronics retailer Circuit City Inc., earning it a downgrade from a BMO Capital Markets analyst. Shares of the Dallas-based movie rental chain lost 32 cents, or 10.2 percent, to close at $2.81 after falling to a new low of $2.52 earlier in the day. Jeffrey Logsdon said in a note to analysts that he was “uncomfortable” with the deal and said it has the potential to divert management attention and financial resources from its own recovery.

Shares of Blockbuster have lost more than half their value since trading at an annual high of $6.67 a year ago. The company has struggled to compete with online movie operators such as Netflix Inc., and Circuit City management has questioned whether Blockbuster can finance the deal. Logsdon lowered Blockbuster to “Market Perform” from “Outperform” and cut his nine- to 15-month price target to $3 from $5. The analyst said the buyout creates a “two-front war” as the company struggles with its own financial problems. He further criticized the deal, saying it would take nine to 12 months to close and another year after before any financial benefit is realized. Furthermore, Blockbuster will likely have to use equity to pay for the deal, which will further push the stock downward, he said. “We find it difficult to imagine that fighting what amounts to a two-front war will ultimately enhance value for (Blockbuster) shareholders,” Logsdon said.

On Monday, Blockbuster announced that it would go straight to shareholders and pay between $6 and $8 per share in cash for Circuit City after saying the struggling retailer had not responded to repeated offers. The deal values Circuit City between $1.01 billion and $1.35 billion, based on its 168.4 million outstanding shares as of Dec. 31. The offer adds a 25 percent to 67 percent premium on Circuit City shares, based on their $4.79 closing price on Feb. 15, the last trading day before Blockbuster made its offer. Shares of Circuit City, based in Richmond, Va., soared $1.07, or 27.4 percent, to close at $4.97.

HD DVD: Pull The Plug Already!

By Uncategorized

Toshiba’s HD DVD format is pretty much completely dead. It’s been a long, drawn out, horrendous death, with Blu-ray stabbing it in the back repeatedly. It’s about time someone pulled the plug on the life support so that we can move on and prices will drop on Blu-ray discs and players as they begin to replace DVDs over the next few years (Don’t worry, your DVD library will not be obsolete, as Blu-ray players are backwards compatible). Another great thing about a single format is that you’ll now begin seeing Blu-ray players come standard in computers and other devices over the next year or two.

Four of the six major movie studios have yanked any and all support for HD DVD away in favor of Blu-ray, and now Netflix has made a solid blow at the format, choosing to do the same. Seems similar to the VHS vs. Beta tape struggle of the 1980s, only this time Sony is on the winning side (they developed the long-lost Beta tape and are now behind the Blu-ray technology).

Netflix chooses Blu-ray over HD DVD

Each week, we seem to see more signs that HD DVD is brain dead. Someone just has to turn off the life support. The latest sign: Los Gatos-based Netflix, the DVD rental service, said [Monday] it is phasing out HD DVD deliveries and will only support Blu-ray DVDs by the end of the year. The company will not be purchasing any more HD DVDs and will only be buying next generation discs in the Blu-ray format.

Netflix said the decision was based on the fact that four of the six major studios have publicly declared exclusive support for Blu-ray. The biggest one, of course, was Warner Bros. which made its announcement last month on the eve of the CES show in Las Vegas. “We’re now at the point where the industry can pursue the migration to a single format, bring clarity to the consumer and accelerate the adoption of high-def,” said Ted Sarandos, chief content officer for Netflix.
It’s not such a big surprise that Netflix went to Blu-ray. Competitor Blockbuster made a similar decision last year.

The question is when does Toshiba, the company behind HD DVD, finally throw in the towel? The company responded to the Warner Bros. announcement by cutting the price of the HD DVD player. But the writing seems on the wall. HD DVD can still live on as a kind of premium DVD player, with its ability to upscale current DVDs. But as far as a true next generation DVD player, it doesn’t appear like people are gonna be looking in HD DVD’s direction.