Bankrupt video retailer Blockbuster (PINK:BLOAQ) plans to auction itself off with the initial bidding at $290 million, a figure that Blockbuster hopes will encourage other interests to step in and buy the company’s assets. Blockbuster is hoping to complete its sale by Apr. 20.
Nobody is interested in maintaining Blockbuster’s retail chain. No matter who walks away with the assets, it’s likely the retail outlets will be liquated in much the same way Movie Gallery chains were across 2009 and 2010.
Still, Blockbuster does have at least a couple of assets that could benefit current players in the home video market, particularly Coinstar (NASDAQ:CSTR) and Netflix (NASDAQ:NFLX).
A move by Coinstar to buy the Blockbuster license could help bolster Coinstar’s Redbox kiosk business. Blockbuster’s kiosk business, Blockbuster Express, has stayed successful even as the retail chain has imploded. This is because it wasn’t actually shackled to the dying business; Blockbuster Express is a fully-owned subsidiary of NCR Corp. (NYSE:NCR).
(NCR pays for the Blockbuster license that’s co-owned by Blockbuster and the BB 2009 Trust. If Coinstar acquired Blockbuster, ownership of the license would transfer to them, bringing associated fees, but not directly affecting NCR’s kiosk business).
Coinstar could add 8,000 kiosks to its existing 28,000 Redbox kiosks. It would also give Coinstar access to the agreements NCR has with Time Warner’s (NYSE:TWX) Warner Bros, News Corp.’s (NYSE:NWS) Fox, and General Electric’s (NYSE:GE) Universal to purchase DVDs in bulk directly from the studios earlier and at lower prices than through third-party distributors.
Where an acquisition would bolster Coinstar’s retail business, an acquisition could benefit Netflix by eliminating one more competitor still relying on physical disc rentals. Netflix could also use an acquisition as leverage in negotiating new terms with movie studios to bring more titles to its instant streaming service earlier than on competing outlets.
Blockbuster, from at least one vantage, is more valuable in death than it has been for some years as a going concern. Investors following recent developments in the home video market — Coinstar’s own instant streaming subscription service through Redbox, Amazon.com’s (NASDAQ:AMZN) announcement that its Prime members can now access 5,000 television shows and movies online — should follow just who is interested in Blockbuster between now and April.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
