Blockbuster Announces Poor Financials, Game Increases

U.S. video and DVD rental giant Blockbuster, also a renter and seller of video games, has announced extremely disappointing second quarter 2005 results, with total revenues down 1.6% to $1.4 billion compared to the previous year, and net loss totaling $57.2 million, compared with a profit of $48.6 million in the same period in the 2004 fiscal year. The decline in revenue and sharp loss is blamed on implementation of the company's new “No Late Fees” program for DVDs and videos, though Blockbuster cites strong growth in base rental revenues and retail sales of games as partially offsetting the decline, as Blockbuster moves into selling both new and pre-owned games more heavily, mirroring rival Hollywood Video and its GameCrazy division. In analyzing total 2005 retail revenues, which increased 11.5% to $360.4 million, Blockbuster cites additional company-operated stores, including freestanding game stores, as a primary cause of this increase. The firm also cited a growth in sales of new and traded games as a factor. Movie rental revenues at Blockbuster stand as the prominent source of revenue at roughly 89% in this last quarter, and game rental revenues hold their ground at 10.6%, up from 9.4% of total revenues in the same period of 2004. Alternately, game sales make up the lion’s share of merchandise sales at 40.5% of all merchandise sales for the quarter. “Our second quarter results reflect both the success of our new initiatives as well as the impact of the declining store-based video rental industry,” said Blockbuster’s chairman and CEO John Antioco. “Our ‘No Late Fees’ program is working, and our online business continues to perform extremely well.”