Blockbuster Revamps Strategy

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According to Blockbuster Inc. CEO John Antioco, the well-known movie, game and entertainment rental service is now taking strides to move more of its customers online—particularly as it will continue to close a number of its retail stores in 2006. At the recent Citigroup Entertainment, Media and Telecommunications Conference, held in Phoenix, Antioco told attendees that Blockbuster also plans to cut expenses in the retail stores it is still operating; the hope is that these changes in strategy will help Blockbuster outperform the industry average.

The reasons behind this move are clear: Blockbuster execs understand that their in-store rental revenue will continue to gradually decline as more and more customers migrate online. And then there’s their pesky online rival, Netflix, which pounded them last year by growoing its subscriber base to a total of 14 million users. Blockbuster, meanwhile, is still chasing the goal of eventually gathering 2 million subscribers, some of them culled from loyal brick-and-mortar customers. Still, their online service is expected to become profitable in 2007, and Antioco said the service would be able to break even, even if they did not reach their goal.

“The profit of an online customer for us is still a very attractive proposition. We will continue to convert as many of the customers to online as we can.”

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