How Low Can You Go: Blockbuster Trots Out The 99-Cent Rental

This story was written by Tameka Kee.
In a move to attract cost-conscious consumers, Blockbuster (NYSE: BBI) will offer 99-cent DVD rentals for the first time, Reuters reports. Full detailslike which titles renters will pay a buck for and how long they can keep themare still being worked out, but it's the latest sign that the once-mighty movie retailer is struggling in the fight against rivals like Netflix (NSDQ: NFLX) (and even companies like Redbox that operate DVD rental kiosks in supermarkets).

Blockbuster has worked to diversify its in-store DVD rental business: it bought online movie-rental service Movielink in 2007, partnered with NCR to test its own kiosk service, and most recently rolled out a set-top boxbut the efforts haven't been that fruitful: it still posted losses (and declining revenues) in Q3. There's also the image problem. While Blockbuster's business as a whole may dwarf its competitors' (a factor CEO Jim Keyes preached to us in an interview) the company is still largely perceived as a stodgy lame duck besieged by nimble, innovative upstarts. 

To top it off, Blockbuster is saddled with debt, and the credit crisis has hampered its plans to secure a new credit facility in 2009. While Keyes said the company will continue to pursue the funds, it's turning to another method to help trim $100 million to $150 million worth of debt from its books: renegotiating its store leases. Keyes told Reuters that the company pays about $450 million a year to lease space for its more than 7,000 stores in the U.S., and its trying to renegotiate pricing on about a third of them. While Blockbuster wouldn't say exactly how much savings could result from the new lease terms, industry estimates point to a savings of as much as $67.5 million. 


By Tameka Kee
  • CBSNews

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