Blockbuster to close U.S. retail stores

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Blockbuster's revenue fell to $120 million in the second quarter, less than half the $253.3 million it generated in the year-ago period.

The retail company that introduced millions of Americans to stay-home movie nights said Wednesday it will close its 300 remaining U.S. stores by early January next year. Its DVD-by-mail business, introduced as a competitor to Netflix, also will be shut down by mid-December.

“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said Joseph Clayton, CEO of Dish Network, Blockbuster’s parent company. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”

Dish Network, which offers satellite pay-TV service, said it will retain licensing rights to the Blockbuster brand and, for now, its vast video library.

“Blockbuster has no brand,” said Dan Rayburn, an analyst at “Consumers stopped thinking about the brand a long time ago. Why did they take so long to close?”

Dish plans to focus on its Blockbuster @Home business, a streaming service available to Dish pay-TV customers for an extra fee.

Blockbuster On Demand, its streaming service for the general public, also will continue to operate. “The quantity of movies (for Blockbuster On Demand) is so limited,” Rayburn said. “Some of them are not even on (high-definition). It’s not even a real service. You can’t put it up there with Vudu or Netflix or Hulu.”

Dish Network bought Blockbuster in April, 2011 in an auction for $320 million as Blockbuster was emerging from Chapter 11 bankruptcy protection.

Dish’s plan at the time was to leverage its more than 1,700 store locations to offer in-store rentals that would complement Dish’s other video offerings. “Cross-marketing and service-extension opportunities” were mentioned by Dish.

But competitive pressures and adapting to the rapidly changing streaming technology proved to be too daunting for Blockbuster’s management, as video lovers continue to flock to Netflix, YouTube and other start-up streaming sites. Cheaper kiosk rental locations, such as Redbox, undercut its prices.

Dish continued to close stores throughout the country. Its rental library was cut in half in the last year, down to 41.5 million units of DVDs and games as of June from 81.9 million a year earlier.

Blockbuster’s revenue fell to $120 million in the second quarter, less than half the $253.3 million it generated in the year-ago period.

“It’s an interesting footnote to business history. (Dish) thought (Blockbuster) had a longer tail than it did. But digital distribution happened faster than people may have thought,” said Matthew Harrigan, a media analyst at Wunderlich Securities.

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