Last Updated Nov 13, 2009 4:10 PM EST
The first problem here is, like Blockbuster, Best Buy is trying to graft a millennial model onto its 20th-century business. As shown by the closing of its closest rival, Circuit City, brick-and-mortar general interest tech stores are dying fast. Blockbuster closed thousands of stores earlier this year - and it, unlike Best Buy, is actually known for movies.
The second issue is online competition from streaming sites, official media portals and content aggregators. The Netflix audience has remained steady since Blockbuster Online arrived two years ago, namely because it had a decade-long head start. Further out, official media portals like Hulu have already captured millions of eyes and, with relationships in place, can easily translate into a movie hub (indeed, "classic" movies are already being featured on most sites). In the five-year plan, desktop content aggregators like Boxee are eliminating the need for more streaming movie channels -- tabs are already set for Netflix, Hulu, YouTube and a handful of other media sites, so why would a consumer need to get movies from Best Buy, of all places?
The third and biggest problem with the move is brand recognition. Is Best Buy where I get a UL-surge protector? Is it where I go shopping for an iPhone? Or is it where I rent When Harry Met Sally? It is akin to Radio Shack suddenly having a streaming music channel like Pandora.
The best bet for Best Buy? Scrapping the streaming movie project and bringing in a used DVD/music section for trade. It would bring in extra traffic, boost sales and create a niche not served by Target or Wal-Mart. The change wouldn't require reinventing the wheel, either.
Video game giant GameStop brought in record profits doing a similar approach. People who still buy physical goods would probably like going to a physical store for it, anyway.