Blockbuster Inc. (Dallas) is undertaking a huge retrofitting project to eliminate 25 percent of its VHS-tape inventory and devote more space to DVD titles. The company says the move will result in a $450 million charge, mostly in its third fiscal quarter.
“As a result of this move, we can get DVD to account for 50 percent of sales by the end of next year,” said ceo John Antioco. DVD rentals currently account for 20 percent of its sales.
In addition to making room for more DVD aisles in its roughly 7800 company-owned or franchised stores in 28 countries, Blockbuster said the format will have a bigger presence on the new release wall, which now provides more than 80 percent of Blockbuster's revenue. “Because DVD takes up less space than VHS,” said Antioco, “we will be able to dedicate more of our sales floor to high-growth new game formats and promising business initiatives like DirecTV and RadioShack.”
The company is planning a domestic holiday promotion to sell DVD players packaged with free DVD rentals and says it will introduce a number of innovative DVD consumer programs in upcoming months, including a rent-before-you-buy concept and a promotion providing free DVD players to customers who purchase DVD prepaid rental cards.