Blockbuster In Surprise Bid To Buy Circuit City

from the does-this-make-sense? dept

Mon, Apr 14th 2008 9:06am — Mike Masnick

The news came out early this morning that Blockbuster was making an unsolicited bid to buy Circuit City, which has left many scratching their heads, saying that the synergy isn't all that obvious. Circuit City has been in trouble for a while, and Blockbuster (while a lot healthier than Circuit City) has been facing its own series of challenges. While it's unclear what Blockbuster's plans are, the deal actually could make sense if Blockbuster was really looking distantly into the future about where its market is heading. It knows as well as anybody that video delivery is moving to the internet eventually -- at which point its business model gets a lot trickier. Yet, by owning a retailer selling hardware -- and the rights to content to be distributed to that hardware, things could actually get interesting. Now, I'll say ahead of time that I doubt this is where Blockbuster is heading, but with both movie distribution rights and the ability to sell hardware, it could embrace the economics of infinite goods, by packaging content (infinite) with hardware (scarce), creating a much more compelling offering, than competitors to either firm alone.

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Filed Under: consumer electronics, mergers, movies, retail
Companies: blockbuster, circuit city

25 Comments

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Stephen, 14 Apr 2008 @ 9:37am

Offer to purchase
Yes, there is some sort of weird synergy that seems possible though I can only glimpse it out of the corner of my eye when I squint a certain way.
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John, 14 Apr 2008 @ 9:39am

Great. two sinking ships.
What is it going to do to turn Circuit City around?
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Anonymous Coward, 14 Apr 2008 @ 9:47am

It might make sense
I was surprised to hear about it this morning, but I think it might work for them. I don't think downloads are going to replace DVD rentals for another decade or more, but still it was clear that Blockbuster was going to have to change its strategy completely at some point in the future. I suppose this may slightly increase the chances of their set-top box being successful, although that's still long odds.
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Thanatos, 14 Apr 2008 @ 9:48am

a failing business model buying a failing business. Blockbuster must be bored with innovating it's market, you can only copy netflix once.
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Nicko, 14 Apr 2008 @ 10:24am

Failed Due Dilligence
The interesting thing is that they made the $6-8 bid in February, and the reason blockbuster made this public right now is because Circuit City was unable to rally the resources to properly do the due diligence to complete a evaluation.

So they didn't just make this bid today. I'm guessing they are trying to get the stockholders to force blockbuster to actually complete the proper financial accounting.
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TheTraveler, 14 Apr 2008 @ 10:27am

Re: It might make sense
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TheTraveler, 14 Apr 2008 @ 10:35am

Re: It might make sense
Sorry hit the enter button.
Is there not a way currently to download Movies to your computer? I am pretty sure blockbuster allows you to download movies with a timer attached to it.
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awm, 14 Apr 2008 @ 10:35am

John has it right: two sinking ships!
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Hellsvilla, 14 Apr 2008 @ 10:37am

They have forgotten
They have forgotten their core business. No, this appropriation does not make any sense. No more sense than a horse and buggy maker trying to buy their way into any other market they don't have the business sense to manage. Blockbuster is trying to reinvent themselves into another type of company so they can keep their jobs. Unless they have talent onboard that is good at running retail consumer electronics and appliance sales, then they will not succeed where circuit city has failed.

This is an act of desperation. Pity them.
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Haywood, 14 Apr 2008 @ 10:50am

It's all just an elaborate money laundering scheme
Pretty much public knowledge that Blockbuster is in that business, maybe they need a bigger washing machine.
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Duodave, 14 Apr 2008 @ 10:51am

Sneaky...
I'm not sure if this isnt more about market manipulation. Maybe BB thinks if they pretend they are healthy enough to absorb a failing retailer, their stock prices will rebound.
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Anonymous Coward, 14 Apr 2008 @ 11:10am

Wanting a company to fail is a fairly immature attitude. Seems like some of the posters on this blog should grow up and move out of their mom's basement.
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dave, 14 Apr 2008 @ 11:12am

Sooo... is Circuit City going to start offering movie rentals or are Blockbuster stores going to start selling TV's and DVD players?
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Alf, 14 Apr 2008 @ 11:32am

Re: Failed Due Dilligence
Actually, if you read the CC statement, they were doing due diligence. They just don't see how Blockbuster can possibly come up with the cash to pay for the offer. It sounds like BB is saying they'll use some highly, uh, "creative" moves to raise the money.
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none of your business, 14 Apr 2008 @ 12:14pm

Re: Re: It might make sense
Hello Traveler?

Yes you can download movies off of the internet, or as you probably call it the interweb. Believe it or not, you can actually watch on the very same computer.
I sure hope someday they will allow tv shows to play on my interweb box soon. But that is probably 50 years away.
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Anonymous Coward, 14 Apr 2008 @ 12:20pm

Re:
I would assume both adding retail to the reltal stores and limiting the stock sold at CC and in add rental space. This would open many new locations for both stores it just depends on how they will integrate it and market the change
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Dave, 14 Apr 2008 @ 12:32pm

Go big or go home
While niether company was doing well by themselves maybe some good will come out of this.

Circuit City is rolling out a used video game service to move in on GameStop becasue that industry is very healthy. Doing the same for movies while backing it with the rental service is a perfect way to accomidate all this ugly physical media. They could also encrouch on the Gamefly video game rental by mail service.

I could easily see brick and mortar Blockbusters dissapearing in favor of including that into the big box Circuit City. Either that or BB could morph into a Circuit City to go. A few download and burn kisosks, some set-top boxes, cell-phones, MP3 players, and stacks and stacks of machine accessible rentals.
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Rekrul, 14 Apr 2008 @ 12:38pm

So if Blockbuster buys Circuit City, I guess that means you'll have to watch out for censored music and movies at CC.
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Vic Divecha, 14 Apr 2008 @ 1:06pm

Hardly a surprise...
This is hardly a surprise, atleast on CNet blogs I read that this discussion has been happening since January! http://mblog.lib.umich.edu/~rdivecha
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Lucretious, 14 Apr 2008 @ 2:17pm

Blockbuster still has cash?
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Nick (profile), 14 Apr 2008 @ 2:39pm

One possible (but hopefully not) scenario is that Hollywood, with its influence on Blockbuster, could try to implement more restrictive DRM into consumer electronics, since Best Buy and Circuit City have influence over what consumer electronics manufacturers design, market, and sell.
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Hellsvilla, 14 Apr 2008 @ 3:29pm

Re:
Best Buy may have influence, but Circuit City certainly not...
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Twinrova, 15 Apr 2008 @ 4:15am

All big box electronics stores are going to blow.
This bidding isn't surprising as more and more "incompatible" businesses are merging to form unrecognizable monsters whose sole purpose is to generate revenue by pissing off its core customers because they have fewer choices.

Of course, some of these mergers have been good, but are quickly being overshadowed by the "big boys" who want to rule the digital empire.

The more I read this site, the more pissed I get. Are consumers really this stupid? Do they not know they possess the power to stop DRM?

I guess not.

If Blockbuster wins the bid, we're all screwed. BestBuy's questionable practices of late for me to stay as far away from it as possible while Circuit City's woes have also caused unsatisfactory performance in my latest experiences.

Blockbuster will most certainly use CC as its front runner to push that stupid download box to consumers and most of its content will be sold per Blockbuster's rules, not consumer demand.

And what will consumers do then?

Thank goodness Amazon still exists. I wouldn't know where to go if it wasn't.

Gaming note: If BB does indeed acquire CC, gamers should stay as far away from CC as possible given that BB is in the "resale" of used games (similar to GameStop).

That latest copy of the $59.99 Metal Gear Solid 4 you bought new may not be as new as you'd expect.
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oregonnerd, 15 Apr 2008 @ 6:38am

infinite
Are you sure you're not inappropriately using the word "infinite" as an exact synonym for "intangible"? The latter would seemingly fit the model of your thinking better, it would seem, Michael.

--Glenn
8]
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david j phillips, 6 May 2008 @ 10:19pm

terminated deal best for CC shareholders
The 10Q Detective opines that BBI’s play for the electronic gadgets retailer was an effort to turn Street attention away from its own business failings—and, a last-ditch effort to revive a moribund brick& mortar business model.

Does anyone remember the RadioShack - Blockbuster alliance? In June 2001, 130 “RadioShack Cool Things” boutiques opened in Blockbuster outlets--six months later BBI pulled the plug on the 'pilot program.'

Is BBI is headed for bankruptcy?

http://10qdetective.blogspot.com/2008/05/circuit-city-should-remind-blockbuster.html
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