Blockbuster Circuit-City Bid Strategy Flawed by Design

By Hubert Nguyen, Posted on Apr 14, 08 10:30 AM PDT

You might wonder why Blockbuster wants to buy Circuit City for a billion dollars. Here’s the insight provided by Jim Keyes, Blockbuster’s CEO: "We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices.”.

This might sound like a good idea, but in my opinion, it is doomed to fail because:

• Blockbuster continues to be a disc-rental company and the proximity is the main reason why customers go there.
• Electronic delivery and (instant) on-demand movie rental is the future.
• Others will have better “movie boxes”, namely Vudu (review) and Apple. Even Windows Media Center PCs might become one in the future.
• Blockbuster isnot likely to get enough exclusive movies

The shareholders are not optimistic: Blockbuster shares are down 16.61% (BBI). But to be fair, they have to try “something”, but I don’t think that this will work.

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