By Bill Zeeble, KERA News
http://stream.publicbroadcasting.net/production/mp3/kera/local-kera-891622.mp3
Dallas, TX – Blockbuster's financial filings, analysts and news stories have hinted this week that the Dallas video giant is near bankruptcy. But Chairman and CEO Jim Keyes tells KERA that Blockbuster is not ready for the death many predict. KERA's Bill Zeeble has more.
Keyes says requirements in regulatory papers demand mentioning the possibility of chapter 11 bankruptcy, or that the company might not be able to continue as a going concern. He says the same basic words appeared in last years filings, without this year's reaction and fear. Blockbuster worked out last year's debts, and Keyes says it'll work this year's out too.
Keyes: I'm 100 percent confident we can work out a solution. Blockbuster needs to survive. It plays in important role in society, to our consumers.
Blockbuster's current debt approaches a billion dollars. Keyes says the company is renegotiating deals with movie companies and partners like NCR. NCR is making 10,000 kiosks Blockbuster plans to install by the end of the year. Those machines will compete with Redbox vending machines that dispense popular films at bargain prices. Business analyst David Johnson says Blockbuster's kiosks may be late in arriving, but they'll have an advantage over Redbox.
Dave Johnson: Not only do they drop dvds like a machine drops Milky Ways but it also has a USB port so you can plug in a thumb drive and when the technology is there and I gather it's almost there, you can download a movie straight into your thumb drive and if you're getting onto a plane watch it on your computer, or take it home and stick it in your TV and watch it there.
Johnson says Blockbuster needs to survive to gain that market advantage. Keyes makes his best pitch that the company will stick around. For one thing, he says Blockbuster has 50 million customers who provide a decent cash flow. And Blockbuster is not only competing with Redbox, but also offers a movie mail business, like Netflix.
Keyes: With the advantage that customers can bring movies back and exchange them in store. It's an added level of convenience. And then finally, adding to our complement, we have digital download capabilities through "Blockbuster on demand." That's a very different product offering from Netflix.
Keyes says, in some cases Blockbuster has those movies one to five years before Netflix. He adds his company has a similarly exclusive deal on new Warner movies. For example, he says, you want to rent The Blindside or Sherlock Holmes? Only Blockbuster will have it for the first month.
Wedbush analyst Michael Pachter says it will be tough for Blockbuster. The model has changed since rental giant had more than 10,000 stores worldwide. Pachter says Blockbuster must shed more stores and employees while still competing on many fronts.
Michael Pachter: Redbox is so profitable they're not going away. Netflix is so profitable that they're not going away. So as long as you have two competitors that can mint money, who are both expanding, something's got to give.
Jim Keyes says it won't be Blockbuster. He remains optimistic the company will transform itself. He says that's what the business is - and has - been doing.
Keyes: We have to change. The Industry is changing. As long we're able to change along with it, we'll be successful indefinitely into the future.
Many market watchers are holding their breath.