(By Mayur Pahilajani - iStockAnalyst Writer)
Dallas, TX - Blockbuster Inc. (NYSE: BBI), a leading movie rental company, is rushing to widen its customer base to increase revenue by teaming up with Sonic Solutions (NASDAQ: SNIC) to offer digital content for consumers on a larger variety of electronic devices.
With the multi-year alliance with Sonic, the Dallas, Texas-based company said Wednesday that it will provide its customers access to a vast library of premium digital entertainment across a wide assortment of home and mobile electronic devices connected to broadband including mobile phones, personal computers, Blu-ray disc players, portable media players and even Web-connected televisions.
The move is considered as a desperate one to compete with its rival Netflix, Inc. (NASDAQ: NFLX), which already provides a free Web-streaming service for almost more than a year to its clients with a monthly subscription of $8.99. Netflix also recently entered a few agreements to create an online video service for its consumers to be available on electronic devices including Microsoft Corp.'s Xbox 360 game console, televisions and portable Blu-ray disc players.
Netflix has reported a rise in its subscribers that were up by 23 percent to 8.7 million from a year ago period in third quarter ended Sep. 30. Now the company expects to report higher number of subscribers between 8.85 million to 9.15 million, which is lower than 8.95 million to 9.25 million customers considering weak economy and rise in unemployment rate.
The Los Gatos, California-based company's revenue in that quarter was higher by 16 percent to $341.3 million from $294.0 million for the third quarter of 2007. In the fourth quarter the company expects to revenue to be in the range of $351 million to $357 million.
However, Blockbuster had reported a quarterly decline of its total revenue for the third quarter of 2008 by 2.7 percent or $33.6 million, to $1.20 billion, as compared to $1.24 billion in the third quarter of 2007. The decline in sales was due to lower rental revenues from subscription and a drop in the company-operated store base worldwide.
The firm also reported a net loss of 48.3 percent to $17.8 million, or $0.11 per share, as compared with a net loss of $34.4 million or $0.20 per share in the third quarter a year earlier. The company indicated that it been trying to transform its offerings to its consumers after reiterating full year outlook.
Today's announcement reflects Blockbuster's efforts to regain most of the customers that may have migrated to its rival company by offering more than 10,000 movies for rent and sale online.
"Blockbuster is a ubiquitous entertainment presence in the physical world," Blockbuster Chairman and CEO Jim Keyes said in a statement. "Through this alliance with Sonic, we plan to become a ubiquitous presence in the digital world as well. Our goal is to offer consumers the most digital content, the most accessibility, via the most devices, both in- and out of home."
The library of offerings will be a combination of titles from Blockbuster and CinemaNow, which is the movie downloading service acquired by Sonic late last year. "With more and more broadband-enabled consumer electronics hitting the market, there is a growing need for a service that gives consumers access to premium entertainment on any device, anytime and anywhere," Sonic's President and CEO Dave Habiger said.
