Blockbuster Cannot Face The Reality of Their Business

Note to Executives at Blockbuster (BBI): PEOPLE DO NOT WANT TO GO TO THE VIDEO STORE ANYMORE!! Hasn't the butt whipping they have received from NetFlix (NFLX) over the past few years convinced them of that yet?

Blockbuster said on Thursday it was testing pricing for its rental formats and will experiment with store layouts to add downloading stations, books or beverages in a bid to shore up its customer base. CEO Jim Keyes said "Are we raising prices? No, as of today, what I don't want to do is raise them three or four times." The ideas mentioned for its new retail format include an interactive area in stores for children, a destination for downloading entertainment to portable media devices or a kiosk for Sony Corp's (SNE) PlayStation 3 game console.

Then something was said that was incredible. Keys noted the retail success of Apple Inc (AAPL), which has a far smaller store base and sells its iPod digital media players, iPhone mobile phones and personal computers. "I get excited about what we could do with what is some of the most choice real estate," Keyes said. Yeah, how about selling it and reinvest that money into the online operations!! The fact that Keyes even mentions his company and Apple in the same sentence illustrate a certain lack of grasp on reality.

Keyes said the company is still considering ways to build up a digital distribution channel for films. Proposals include merging its Blockbuster.com Internet site for ordering films by mail with its Movielink download service, and partnering with telecom and cable companies. This ought to be the sole focus of the company right now. This is the future, not a revamped "old way". Any money being plowed back into the stores is just wasted. Stop trying to reinvent the wooden wheel and and admit the rubber ones are the one folks want.

Keyes also said that the change would not be "an overnight success". Translation? More dismal performance for shareholders. I think this is in part why shares are down 11% and are almost cheaper than a rental.