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January 12, 2005

Dead Business Walking: Movie Rentals


One of the mysteries of this still-young year is a carryover from last: why are Blockbuster, private equity group Leonard Green, and Movie Gallery fighting over Hollywood Entertainment like Veronica and Betty over Archie?

Yesterday's papers carried news of Movie Gallery's apparently successful bid for Hollywood, capping a nine-month-long battle.

I've got news for you: I grew up reading Archie, and Hollywood's no Archie.

Not even in the same ballpark.

Consider that Sumner Redstone, the founder/owner of Viacom, couldn't dump Blockbuster fast enough last year, when it became clear the whole video-rental business was on life-support.


And it's not just store-based rentals with a severe case of the dwindles: with Sam's Club having just lowered its monthly charge for online DVD rental to $12.97 a month, with NetFlix hemorrhaging cash after having dropped its own fee to 17.99 to compete with Sam's before the latest counter-strike, NetFlix is now calling for the cardioversion machine to be brought to the bedside.

Bet the short-sellers can't work fast enough to get the last few dollars out of this corporate corpse-to-be.

Better put gel on the paddles, 'cause they're gonna be needed real soon.

Video-on-demand, whether via cable or phone line or satellite or Wi-Max or some new delivery means not yet visible on the horizon, is coming, slowly to be sure, but inexorably.

The only people who'll still be smiling after the upcoming deal is done are the investment bankers at UBS, Merrill Lynch, and Wachovia, the advisers making it happen.

The "golden crumbs," as Tom Wolfe so aptly put it in "Bonfire of the Vanities," will be plenty nourishing, as last month's again-spectacular Wall Street bonuses demonstrated quite nicely.

I give USA Today credit for being the only major newspaper to offer any skepticism about the proposed merger: they began their story on the front page of yesterday's Money section like this:

    The often baffling bidding war for Hollywood Entertainment....

I'm also amused by talk of how the Federal Trade Commission's possibly going to raise anti-trust objections if Blockbuster succeeds in buying Hollywood, creating "a merger of the two biggest video chains."


To me, that makes about as much sense as the government objecting to a merger of the two biggest horse buggy makers after Henry Ford started cranking out Model-Ts.

Say what?

Talk about a waste of time and energy....

January 12, 2005 at 02:01 PM | Permalink


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