James Delahunty
10 Aug 2005 20:46
Blockbuster is being increasingly hurt by online movie rental services. Today the company announced a disappointing $57M loss in the second quarter largely due to the company's "no late fees" policy. Blockbuster scrapped the late fee's for movie rentals in order to compete more with online rental services. In the U.S., Blockbuster customers can keep a rental free of charge for seven days after the movies return date. However, if a movie is returned later than this, then the customer is obliged to purchase it minus the cost of renting it.
The company is now revising its full year financial targets. Shares in the company fell by 11% following the news. The company is finding it hard to compete with services online including Netflix which are gathering thousands of more users weekly. Blockbuster also admitted that some of the 9,000 stores worldwide may have to be closed. "As the decline in store-based video rental industry continues, stores will have to close," chief executive John Antioco said.
In the same quarter last year, Blockbuster announced a $48.6M profit. However the company has insisted it will return to profitability in 2006.
Source:
BBC News