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Blockbuster to benefit from Hollywood strike

The chief executive of Blockbuster Inc. said Wednesday DVD rentals should get a boost early this year from the Hollywood writers' strike, which will help rent more old TV episodes.
/ Source: The Associated Press

The chief executive of Blockbuster Inc. said Wednesday DVD rentals should get a boost early this year from high gasoline prices and the Hollywood writers' strike, which will help his stores rent more old TV episodes.

James Keyes said the outlook made him confident that Blockbuster can meet covenants imposed by its lenders "in the first quarter and going forward."

He said DVD rentals will benefit as pricey gasoline keeps people at home, and by store closings among rivals. And the Hollywood writers' strike will help Blockbuster rent more TV episodes, he said.

Keyes also said Blockbuster is weighing whether to jump into the kiosk business, following the lead of redbox and other operators who have set up movie-rental vending machines inside stores.

Kiosks could help Blockbuster expand its reach, and the chain is testing them, Keyes said. But it hasn't been more aggressive because it believes kiosks may only be an interim step before most movies are rented in digital form, he said.

"We think the ultimate solution is a kiosk in a Blockbuster store and outside of a Blockbuster store that ... will be able to distribute that content to your portable device," he said.

Keyes spoke to a Citigroup investor conference in Arizona.

Blockbuster investors have been a restive group. The Dallas-based company's shares have fallen in three of the last four years as it battled against cheap DVDs sold at Wal-Mart Stores Inc. and other stores, and the online business lost money in an effort to catch Netflix Inc.

Blockbuster lost 500,000 subscribers to its online-order, mail-delivery business in the third quarter. Last month, Blockbuster raised subscription rates for some of its remaining 3.1 million online subscribers — it won't say how many. Those moves further dimmed any chance to catch Netflix, but raised hopes that Blockbuster can make the online business profitable.

Keyes resisted when an analyst suggested that online rentals are a "maturing" business.

"There is still opportunity, we think, in the by-mail delivery business ... we do think though the growth has slowed," Keyes said. "We're deciding to step back from that business, see where it will settle out ... and put our attentions really on what I would characterize as more of a true online business, which is the digital delivery of content."

Keyes also said Blockbuster can boost its traditional in-store rental business by doing a better job of keeping hot titles in stock.

The shares rose 10 cents, or 2.9 percent, to $3.57 Wednesday.