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Blockbuster examines Circuit City books and withdraws buyout offer

7 July 2008 15:18 by Rich "vurbal" Fiscus | 3 comments

Blockbuster has decided to back away from their earlier plan to buy Circuit City. The offer, made more than two months ago, was always contingent on a review of the ailing electronics retailer's books. Apparently they didn't like what they saw and retracted the offer.

With this deal at an end the apparent next step for Blockbuster is figuring out if there's another similar company worth buying. Blockbuster's interest in Circuit City was predicated on the belief that their brick and mortar video rental operations are in need of a presence in a more traditional retail setting. They've already been working on kiosks for transferring video directly to portable media players and flash drives.

"We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand. We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment," said Jim Keyes, Chairman and CEO of the company.

The problem is the increasingly tight profit margins for consumer electronics. Even Best Buy, the undisputed heavyweight champion of US brick and mortar electronics specialty stores, faces slimmer margins as video game console sales grow and demand for other products like DVD shrinks.

Meanwhile chains like Wal-Mart are able to thrive on the same products. They actually thrive on the lack of diversity among console models because it because they fit nicely into a small electronics department. Lower profits per unit also benefit retailers with more varied products since they can offset low margins in one area with high margins in another.

Permalink to this article

Blockbuster to release set-top box (10 November 2008)

Circuit City moves toward serious consideration of buyout (13 May 2008)

Blockbuster bids for Circuit City (14 April 2008)

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defgod (Newbie) 7 July 2008 15:28
They actually thrive on the lack of diversity among console models because it because they fit nicely into a small electronics department. I think you meant to say "because they fit it nicely into a small electronics department." edit spelling [ + quote] This message has been edited since posting. Last time this message was edited on 7 July 2008 15:29
sgriesch (Newbie) 7 July 2008 18:10
Most retailers don't make much on the console OR the games. It's always been that way. They make their money on the accessories and extra warranties sold with the system. Cords and controllers are where they get you. Games and movies don't have much mark-up (for the retailer). The media companies make money off of those. Wal-Mart does well because they have the room to sell them through all of their stores. More locations equal more sales, and they have the same profit margins as other retailers. Consoles and games are just ways to get the consumer in the stores in hopes of them buying something else (like the controllers and the cords). [ + quote]
susieqbbb (Member) 9 July 2008 0:59
I could see no one wanting circuit city i man come on 13,000 dollers for a rear projection tv i can get one for 699.99 at video only. And the only thing best buy tries to do is cram the latest down everyones throught it rather sucks. [ + quote]