Blockbuster Chain: End of Era–Closing All Rental Stores

Blockbuster: Dish Network will close all of the video rental chain’s remaining U.S. stores, as well as its DVD-by-mail business by early next year.

Dish, which bought Blockbuster in 2011 for $320 million, attributed the move to more consumers switching to digital alternatives to rent or stream movies, while kiosk operators like Redbox also have played a considerable role in Blockbuster’s demise.

Dish continues to stand behind the brand, which it sees as an opportunity to grow its VOD business among Dish’s more than 14 million satellite TV subscribers.

“This is not an easy decision, yet consumer demand is clearly moving to digital distribution of video entertainment,” said Joseph P. Clayton, Dish president and CEO. “Despite our closing of the physical distribution elements of the business, we continue to see value in the Blockbuster brand, and we expect to leverage that brand as we continue to expand our digital offerings.”

Dish currently operates around 300 Blockbuster stores. In an unusual move, stores that operate as licensed franchises will be able to remain open and operate under the Blockbuster name.

About 2,800 jobs will be affected as part of the store closures, the company said.  The Blockbuster By Mail service will end in December.

Dish will now focus on promoting the Blockbuster brand to customers through Blockbuster@Home, a service that streams movies and TV shows to TVs and mobile devices. Starz, EPIX, Sony Movie Channel and Hallmark Movie Channel are among its content partners.

Dish’s decision to shutter Blockbuster’s stores comes as movie rentals from such retail outlets continues to decline dramatically, and marks the end of an era for a once dominant brand founded in 1985 and reliable source of revenue for Hollywood’s studios.

During the third quarter, revenue from such rentals fell 14.5% to $245 million, according to the Digital Entertainment Group, the industry org which tracks the homevideo biz. This year, physical rentals from stores are down 13.2% to $767 million. Blockbuster had been the dominant player in that sector, with its closest rival Hollywood Video having shuttered years earlier.

Compare that to rentals from kiosks, which earned $472 million during the third quarter, up 3.8% and $1.4 billion for the year so far, a decline of nearly 1.3%. Subscription-based streaming services like Netflix saw revenue rise 33% during the third quarter to earn $815 million and $2.3 billion so far in 2013, up 32%, the DEG said.