Blockbuster?

[TGirl Nikki]

Ok, this will probably be the one and only time I ever post in this particular section, but truth to be told, I've learned a lot more about investing by reading other peoples' posts than I ever would have expected. You guys would be surprised at how many SPs read this section without ever posting a reply! I've bounced this idea off a few people with experience (and received mostly positive feedback) I thought I'd throw it out here for and see what TERBland has to say.

I'm a very small-time investor, mostly just using my TFSA account to keep ahead of inflation, and with interest rates at an all-time low, savings accounts and GICs are basically worthless to me... but I don't have the time or the expertise to play the higher-risk stocks. Mostly I've concentrated on the big five bank stocks, preferring dividends to growth, but I've been thinking about taking a flyer on Blockbuster (BLOAQ.PK), which is sitting around 35 cents/share as of this afternoon.

It seems that Blockbuster has mostly abandoned their traditional business model, and is now concentrating on online distribution instead of DVDs and Blu-Ray discs. They've been promoting their new model pretty heavily, and it seems that Netflix is their only real competition. Netflix has also adjusted their business model in recent years, abandoning snail-mail DVD distribution in favour of online streaming.

But the biggest knock against Netflix has been their limited content, which I suspect is mostly due to an inability to solidify distribution agreements with the major movie studios. Blockbuster, on the other hand, has been working with the major studios for decades, and might be much better positioned to bring big-movie distribution to the online market, due to their connections with those same studios.

Reasons why Blockbuster might be a good pickup:

- History of distribution agreements with major studios
- Brand recognition and a good reputation with the consumer
- Their stock price is quite low right now
- With online distribution, there's no need for carrying a large inventory of stock, nor would they need to rent prime real estate for their stores or carry large numbers of employees (minimal overhead)
- Advances in technology that would improve picture quality and streaming speeds

Reasons against:

- Recently emerged from bankruptcy
- Uncertainty amongst internet providers regarding internet shaping, and an unwillingness to allow unlimited bandwidth
- Limited competition among IPs, and a desire to control the content available to their customers
- Probably a bunch of other things that I'm unaware of or haven't considered (which is why I'm asking for advice from those with more experience!)

Anyways, I'll probably be doing something about this within the next week or so, and I'm curious to hear other peoples' thoughts on this. If you'd prefer not to reply publicly, you can email or PM me instead. Thanks in advance for your advice!

 

[b1icaj27]

My 2 cents

Blockbuster doesnt have a content advantage over Netflix, Apple, google or amazon. Digital distribution rights are sold separately from DVD or TV broadcast rights.

That means that Blockbuster must compete for content the same as everyone else. With the share price where it is they are unlikely to be able to raise the funds to play in the online space. Their online presence today is not nearly as good as Netflix. Their content is fornsale only.

Dont compare what you see on Netflix in Canada to Bockbuster. Every provider in Canada has to go through different licensing issues than the US and it drives up the cost and reduces what is available for us. ( sign up for a US Netflix account and you will see what I am talking about)

The better play may be to look at some of the content distributors that own the rights to many shows. Starz is one such company.

 

[Brill]

There's still a market for renting dvds and games, many people don't want to or can't download. I imagine we'll see more kiosks in supermarkets, variety stores and fast food restaurants like Redbox is doing in the US. Make it cheap like $1 per rental, convenient and have lots of outlets.
Blockbuster got too big, wasn't able to downsize and moved to on-line to compete with NetFlix too late. I'd still avoid them especially if Redbox or something similar comes to Canada.

 

[DATYdude]

Blockbuster's US operations lost money and they were brought into bankruptcy by the Hollywood studios who clearly don't have any confidence in video rentals and who may also be glad for their demise given the lower hardware costs in producing and distributing movies in digital format. The buyer, Dish Network, would seem to have intended to use Blockbuster as a means of signing up new clients rather than of running a rental chain.

The Canadian arm was the only one making money, with $15million in the bank, but for some reason the appointed receiver couldn't or wouldn't accept one the several offers on the table (Dish was rumoured to have been interested), opting instead to abandon the leases and the employees and sell off remaining inventory. I think that was a shameful decision.

I'd say Blockbuster is NOT a good buy at all.

 

[wigglee]

I would bet that anyone trying to get online distribution rights for Canada would face some stiff competition from Bell and Rogers

 

[TGirl Nikki]

Thanks to everyone who chimed in, it seems that some of my assumptions were unfounded, and I'm glad these posts have helped to temper my enthusiasm. I'm still going to pick up some of their stock, because if they're able to find a niche in the online distribution market, they can definintely benefit from brand recognition; that might help recruit customers who are new to the digital scene. But I'm not going to buy as much as I might have before, and I'm going to go in with the expectation that I could end up losing whatever I've invested in them.

I still think it has potential to be a pretty decent play, but it's definitely not the slam-dunk I was hoping it was. Thanks again for the advice!

 

[warren buffet]

I would not touch this, my two cents. Nikki, I must say though you sound like a bright girl, I mean T-girl

 

[djk]

[SUP][/SUP]FINRA is saying stay far away - http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/TradingSecurities/P124622

Read the below quote very carefully.

In fact, the company has not exited bankruptcy, and the company itself stated in a recent SEC filing that even though its shares continue to be quoted on the Pink Sheets, they may have “no value.” In another recent filing, the company stated that there are “no further business operations nor assets to liquidate” and noted any financial success associated with the company that acquired the Blockbuster brand would have “no impact” on the value of the BLOAQ and BLOBQ shares.

I'm curious as to where you read or heard BB came out of bankruptcy.

 

[warren buffet]

the stock is worthless

"None of the publicly owned stocks issued by Parent prior to the commencement of these chapter 11 cases, including its Class A and Class B common stock, which are currently trading on the OTCQB under the symbols BLOAQ and BLOBQ, respectively, are or will become securities in DISH or New Blockbuster, which are independent, non-debtor companies.

As detailed in Parent's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on July 12, 2011, the Debtors continue to remind investors of their strong belief that there will be no value for the common stockholders in the bankruptcy liquidation process, even under the most optimistic of scenarios. Stockholders of a company in chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In these cases, because the Asset Sale proceeds are significantly less than the Debtors' administrative liabilities, the Debtors anticipate that Parent stockholders will receive no value for their shares of its common and preferred stock. Accordingly, even though the Parent's common stock continues to be quoted on the Pink Sheets under the symbols BLOAQ and BLOBQ, it has no value and Parent's stockholders should not view the trading activity of its common stock on the Pink Sheets or any other market or trading platform as being indicative of the value Parent's stockholders will receive as part of the chapter 11 cases or in connection with any subsequent chapter 7 liquidation. The Debtors are in the process of changing their ticker symbol."

 

[GPIDEAL]

I wouldn't have even imagined Blockbuster to be a play considering their exit from the Cdn retail marketplace, unless you had insider knowledge or were speculating on a hiccup.

 

[Rockslinger]

I would bet that anyone trying to get online distribution rights for Canada would face some stiff competition from Bell and Rogers

Unless you are an Egyptian company. In that case, Tony Clement would drop his drawers for you.

 

[richaceg]

At this age of technology...you have to look forward and see what's up ahead...streaming & downloading. Dvds are slowly dying. Bluray has a short life span as well. People will go after convenience...BB is slowly transforming into media sharing online...BUT...the competition is already up ahead. Don't think about Netflix as the only competition they have because they are not. I'd feel safer to put my bet on Yellow Media than BBuster...but then again...I won't. Putting money on stocks like this is like throwing a hail Mary.

 

[Rockslinger]

You might have better luck buying Kodak stock. By "stock", I don't mean their film inventory. Hee, hee, hee.

 

[TGirl Nikki]

Wow, good thing I listened to this advice, and took a pass on it - the stock is officially worthless after all. I guess brand recognition isn't worth what it used to be...

http://www.fool.com/investing/general/2011/11/01/this-stock-is-going-to-zero-and-you-know-it.aspx

Seems that a little knowledge is a dangerous thing... I'm a reasonably intelligent person, but I was definitely out of my league on this one. I probably need to get myself a real broker if I'm going to play the market like this!

Thanks to everyone who steered me away from what would have been a pretty big mistake - always better to learn the easy way, rather than the hard way!

 

[Annonymous]

lmao i died reading this thread. people these days buy a share of google or apple then think they are "investors".

people these days are soo stupid, thinking anyone can become an investor, if it was that easy, the entire world would be doing it.