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Blockbuster closes stores, continues battle with Netflix
Increasing competition
As the number of 'brick and mortar' movie rental stores begins to dwindle across the U.S. it is ironic that the number of options for the consumer is actually increasing dramatically. Indeed, total in-store movie rentals fell by 9% in 2005 because more and more movie lovers are finding preferred services elsewhere. Namely, Pay-Per-View outlets including On Demand, online subscription services like Netflix, and in-store DVD vending outlets such as Redbox are attacking video giants Blockbuster and Movie Gallery from every angle.
Blockbuster: focus online
For its part, Blockbuster has no intention of going anywhere. Though slow movie rentals has resulted in the closing of 343 Blockbuster stores in the first six months of 2006 alone, the industry leader is very active in the online subscription service and estimates it will have 2 million internet subscribers by the end of 2006. To compete with internet subscription leader Netflix, Blockbuster plans to augment its burgeoning online service by maintaining the video stores that remain economically viable. All things considered, Blockbuster and its top competitor Movie Gallery certainly have their hands full when considering Netflix is projected have 20 million subscribers by 2011.
Redbox: movies in a vending machine
Two other movie watching possibilities that are gaining traction among distributors are vending machines and downloads. Redbox and Coinstar lead the pack in DVD vending machines with the former inking an exclusive deal to put its product in participating McDonald's fast food restaurants. Customers can browse a selection of approximately 70 to 80 new release titles in these machines with overnight rentals being relatively inexpensive at $1.
Movie downloads to TV
Netflix figures to spearhead the movement and has even developed a business model by which a set-top box would allow subscribers to download movies right to their television screen. Though still in the development phase others, including Blockbuster, have taken an interest.
Excerpt from Investor Business Daily
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