Rent it. Buy it. All at Blockbuster.
Blockbusters 5400 stores continue to be revamped. First the emphasis was changed to DVD rentals. Now agressive sales of those DVDs will also be added to the mix. But the shift won't be an easy one for Blockbuster and could force their gross margins down significantly since rentals and late fees are much more lucrative than price wars over sales according to this Wall Street Journal story (subscription required):
Blockbuster has close to 40% of the roughly $9 billion U.S. video-rental market, while Wal-Mart is estimated to have about 28% of the $14 billion video retail market -- making Wal-Mart a bigger customer of the Hollywood studios than Blockbuster, an analyst estimated last year. Blockbuster, on the other hand, has only 3% of the retail market, but wants to triple that share by 2006...
"Our customers spend about $12 a year buying movies from Blockbuster," Mr. Antioco said. "The average U.S. consumer spends $130 a year on movies. The difference is what our upside opportunity is." He played down suggestions that the new strategy pits Blockbuster more directly against Wal-Mart, noting that the mass merchant has been in the video-sales area for a long time. Referring to Blockbuster as an "ankle pecker" in the movie retailing business, he called Wal-Mart a "goliath."
..."A huge part of DVD sales is new releases, but they're used not as profit drivers but traffic builders," says Brian Gildenberg, vice president of Management Ventures, a consulting firm in Cambridge, Mass. "Wal-Mart's advantage, though, is that they have a lot more to sell you once you're in the door."