Andre Yoskowitz
3 May 2007 15:13
After Blockbuster announced its first quarter earnings yesterday, a few things became clear. The company had gained market share on rival Netflix but at the loss of profit. Losses were $46.4 million total on revenue of $1.47 billion compared to the same quarter in 2006 where there was a loss of only $1.9 million on revenue of $1.4 billion.
Subscriber growth was up according to Blockbuster chairman and CEO John Antioco: "The first quarter of 2007 was our highest subscriber growth quarter ever, surpassing even the initial success of the program and providing clear testimony to the consumer appeal of our integrated online and in-store offering".
Antioco also stated that the company gained 800,000 new subscribers during the quarter bringing their total close to 3 million. He said the company hopes to reach 4 million subscribers by the end of 2007.
Although Blockbuster had a greater growth than Netflix did for the quarter, Netflix's 6.8 million subscribers still dwarfs that of Blockbuster.
However, the growth is coming at a price. The company's new Total Accesss Program, which allows users to return their online rentals in-store in exchange for a free rental is very costly. Blockbuster also runs the risk of cannibilizing their brick and mortar rental store business, as online rentals skyrocket and in-store rentals shrink.
Blockbuster also completely lacks a download service which Netflix has (although it is in early development) and as time passes and more and more users move onto downloading over physical discs, Blockbuster will be forced to play catch up again.
Source:
Arstechnica