After years of losses and store closures, Blockbuster Inc. has a message for the country: We're still here.
The once dominant movie-rental chain, which is undergoing Chapter 11 reorganization, will this week launch its first nationwide advertising campaign since 2007. The goal is not only to advertise what the company sees as its advantages over competitors Netflix and Redbox, but also to let consumers know that despite widely publicized struggles, it's still open.
"One of the biggest challenges for Blockbuster for the past few years has been public perception, and this is intended to remind people that we're still in business and we have a unique offering," said Chief Executive Jim Keyes.
Blockbuster has fallen behind its competitors in recent years as consumers have flocked to Redbox's kiosks, which rent out movies for $1 a day, and Netflix's DVD-by-mail subscription plan, as well as a growing number of digital options. Blockbuster now offers its own versions of all those options, but the other companies had a head start.
Dallas-based Blockbuster won approval from a federal bankruptcy judge and the lenders funding its operations to spend $15 million to $20 million on the new ad campaign, which highlights the fact that it offers many new releases 28 days earlier than Netflix and Redbox do. Both of those companies have agreed to impose delays on offering new DVDs from 20th Century Fox, Universal Pictures, Warner Bros. and, in Netflix's case, Sony Pictures because of the studios' concerns that their low rental prices undercut profits. Blockbuster charges higher prices, typically $3 to $5 for an in-store or online rental, generating more money for studios that share in the revenue.
With the new campaign, Blockbuster's ad spending next month is to be three times as high as it was last December. The final month of the year is traditionally one of the most lucrative for the company, as summer event movies come out on DVD and families watch movies together over the holidays.
For the last several years, Blockbuster has focused its limited advertising on certain markets. But, Keyes said, the company felt it was important to run national ads on the broadcast networks in order to send a message to all consumers as well as to promote its digital and mail offerings, which are available throughout the country.
Since Keyes came on board in 2007, the company has tried to turn around its failing business by closing stores and investing in those digital and mail offerings, as well as partnering with NCR Corp. on rental kiosks. However, Blockbuster has continued to lose money. It has been hobbled by nearly $1 billion in debt, and by the middle of summer, it could no longer afford interest payments. The company filed for bankruptcy protection in September.
As part of the reorganization, Blockbuster's debt is being wiped out, and it will hand equity control over to its bondholders. The company is also expected to close 500 to 800 of its 3,425 U.S. stores. It is aiming to exit bankruptcy by early spring.