Blockbuster Tries To Recast Itself As More Than Dvd-rental Chain

In an effort to turn around Blockbuster Inc., Chief Executive Jim Keyes is trying to get customers to think of the struggling video-rental chain as more than just a pit stop for DVDs.

By offering a broad array of entertainment options and ways to get them, Mr. Keyes hopes to beat back competition from companies that provide movies via mailed rentals, kiosks and deeply discounted sales.

But even with a detailed plan, Mr. Keyes faces a tough slog. He has already closed unprofitable stores and slashed inventory, and the chain is still struggling to turn a profit. In three of the last four quarters, Blockbuster posted losses, and it got a going-concern warning from its auditors in April.

"If we saw our future as only renting DVDs, there would be a question about the future," Mr. Keyes says. "But if our real mission is providing the most convenient access to entertainment, there's a real opportunity for us." Mr. Keyes's biggest initiative, spearheaded by Senior Vice President Kevin Lewis, a former Philips Electronics NV executive, is the company's move into digital delivery. Companies used to think of that approach as simply providing a Web site like Blockbuster.com where consumers could watch or download movies, but the consumer adoption rate for that technology has been lackluster.

Recently, some consumer-electronics companies have begun providing TVs and DVD players that let consumers tap into the Internet wirelessly to get movies. Blockbuster has jumped in, partnering with Samsung Electronics Co. to get a "Blockbuster" button that's built into some new Samsung DVD players and displayed on the home screens of some Samsung TVs with Internet access. It has a similar arrangement involving Tivo Inc.'s digital recorders. Now, customers with these devices can rent or buy new hit movies from Blockbuster.com by clicking a button.

But digital delivery as a meaningful revenue driver is probably a few years off. One company executive describes it as still a "rounding error." In the meantime, Blockbuster needs stopgap measures because it faces tough competitors. Netflix Inc. is the market leader in mail-order rentals. Coinstar Inc.'s Redbox has more than 20,000 kiosks in locations like fast-food restaurants and grocery stores, compared with the 3,800 NCR Corp. operates under the Blockbuster Express name. And big-box retailers are selling DVDs at steep discounts.

Mr. Keyes argues that Blockbuster has something these companies don't: the ability to deliver across all channels. Thus, consumers can order a movie by mail, return it to a store, or tap into the growing Blockbuster Express kiosk network and an online library of titles.

Thursday, the company will announce that if Blockbuster customers want a movie that isn't available at their local store, they have another option: Blockbuster will mail the movie, on a rental basis, even if the customers don't subscribe to the company's by-mail subscription plan, and charge the in-store rental price.

In addition, the company announced Wednesday an iPhone application that will let Blockbuster customers check in-store availability and manage their online movie queues.

He is also trying moves like making Live Nation Inc. concert tickets available in some Blockbuster stores, selling and renting videogames, and adding DVD players and other electronics products with Blockbuster logos and services that the company hopes will eventually boost its online business.

"They're not out of the woods," says Rich Ingrassia, a senior research analyst at Roth Capital Partners LLC who has a buy on the stock. "They're in a lot of different business sectors here, and they all have to work for Blockbuster to work."

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