Blockbuster to Close 960 Stores by End of 2010

Competition from Netflix, Vudu and Redbox has hit the movie rental chain hard. Perhaps it’s shifting from brick and mortar to Blockbuster On-Demand.

By Tom LeBlanc

09.16.2009 — Blockbuster will close up to 960 stores by the end of 2010, leaving it with about 20 percent fewer stores in the United States.

It’s not a surprise. It’s a sign of the times. About 18 percent of Blockbuster’s stores aren’t making money and 47 percent are only mildly profitable, according to a filing with the Securities and Exchange Commission.

The once dominant movie rental chain, which had already closed 276 stores as of mid-August 2009, has seen intense competition lately. Netflix seems to be popping up everywhere with TV, Blu-ray player and media server manufacturers offering its popular “watch instantly” streaming feature directly through its components.

Netflix, which now has 10.6 million subscribers, earned $55 million through the first half of 2009. Blockbuster lost $15 million.

Vudu, an on-demand movie service that boasts “the most HD movies,” has partnered with mainstream manufacturers like LG Electronics.

But it’s not just the transition to digital content streaming that seems to be collapsing Blockbuster’s business model. Inexpensive disc rental alternatives, such as Redbox, also are taking a toll.

Perhaps Blockbuster’s decision to close 960 stores reflects a transition rather than a setback. Blockbuster hopes to have 10,000 kiosks across the country by the middle of 2010. At the end of August 2009, it had 500. The brick and mortar store also offers on-demand streaming. It recently partnered with TiVo and Samsung to provide Blockbuster OnDemand in TVs, DVRs and Blu-ray players.

Whether by design or necessity (or both), Blockbuster is definitely reworking things. In a regulatory filing on Tuesday, it said that along with conversion of certain stores to outlets and lease mitigation or termination efforts, total store closures would be in the range of 1,335 to 1560, Reuters reports.

Blockbuster, which says it serves over 50 million customers in over 20 countries, saw its NYSE shares close at $1.40 on the day the store closings news broke.