Blockbuster bids over $1B for Circuit City, looks to rival Apple stores

in General Discussion edited January 2014
Movie rental house Blockbuster has made an unsolicited takeover bid for struggling electronics retailer Circuit City, a move that aims to combine the stores of both companies into "a game-changing retail concept" akin to Apple Inc.'s widely successful international retail operation.

Blockbuster made the all-cash offer of $6.00 to $8.00 per share in a February 17th letter to Circuit City's chairman following months of informal negotiations between the two companies, the company revealed in a statement Monday. Based on the closing price of Circuit City's 168.4 million shares on December 31, 2007, the deal values the No. 2 US electronics retailer at approximately $1.01 to $1.35 billion.

Blockbuster said the combination of the two companies would result in an $18 billion global retail enterprise uniquely positioned to capitalize on the growing convergence of media content and electronic devices, which has thus far been dominated by the efforts of Cupertino-based Apple through its tightly-knit ecosystem of hardware, software, and online services.

Word of the offer comes a week after reports suggested that Blockbuster was also evaluating a plan to enter the electronics hardware business with a set-top-box that, like Apple TV, would allow customers of its Movielink service to stream movie rentals to their high-definition TV sets.

"Our proposal offers Circuit City a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," said Blockbuster chief executive Jim Keyes. "We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies."

Circuit City, which operates nearly 700 stores across the US, had yet to respond to Blockbuster's offer as of Monday, compelling the movie rental chain to make its proposal public because "it believes the shareholders of Circuit City should have the opportunity to participate in determining the destiny of the company."

Should the deal ultimately receive approval, it will form a combined retail chain of over 9,500 stores, including nearly 6,000 in the US. By comparison, Apple along with electronics retail partner Best Buy currently operate around 800 US-based retail points for the former's electronic device offerings.

Blockbuster isn't the only technology player looking to replicate the success of Apple's retail business. Last week it was reported the Microsoft is also mulling the prospect of opening a self-branded chain of retail stores to promote its Windows franchise.


  • Reply 1 of 50
    crees!crees! Posts: 501member
    Blockbuster just sells movies and games. It doesn't currently make hardware or software. Circuit City doesn't make hardware or software either. More players are obviously needed in this venture and so far it looks like the ship is sinking even before it has left port.
  • Reply 2 of 50
    godriflegodrifle Posts: 266member
    That dog'll hunt. Last time I was in a Blockbuster, I said to myself, "Self, now *this* is retail!". I can't remember the last time I went into a Circuit City, but I'm sure I found myself staring at walls to third-party electronics gearing thinking to myself, "Self, now *this* is electronic retailing!".

    But the two of them together. THINK of the synergy: CityBlock or CircuitBuster.
  • Reply 3 of 50
    Well both companies certainly need some sort of change. You cant even compare the retail experience of CC and Best Buy imo, and rental video stores are on the bubble of being obsoloete. Granted it might take 5-10 years before people look back to DvDs with a nostalgic eye, but the writing is on the wall.

    Lol is CC going to be a rent to own type operation?
  • Reply 4 of 50
    Regarding competition with Apple Stores: It appears that imitation is the sincerest form of cluelessness.
  • Reply 5 of 50
    quinneyquinney Posts: 2,496member
    I love the smell of desperation in the morning.
  • Reply 6 of 50
    solipsismsolipsism Posts: 25,726member
    So Blockbuster plans to save two sinking ships by lashing them together. I don't see this working out without something entirely new to add to the mix.
  • Reply 7 of 50
    tacojohntacojohn Posts: 980member
    Well- they both need a completely new business model.

    I'd scrap everything, and do this

    ? Use the CC stores as more of a "premium" electronics retailer w/out premium pricing

    ? Make sure you have staff that knows what they're talking about

    ? Offer a more "personal" shopping experience to differentiate from best buy

    ? Make sure every store has great working demo equipment

    ? Turn the Blockbuster stores into "mini" stores that offer service for your gear, focusing on "new" gadgets and electronics, maybe have store events like Apple does, hype new products, etc.

    ? Have a TON of DVD/Bluray rental kiosks in all stores w/ competitive pricing to netflix- use these to draw people into the store to buy new stuff

    ? Give me a "store of the future" feel when I walk into the store

    The main thing that I hate about big box electronic stores is a lot of their demo equipment is broken and setup terribly. They never have the newest thing out on the shelf, internet access is blocked, and you can't actually "use" the stuff before you buy it. Plus, *most* of the people who work there don't know jack about what they're selling.
  • Reply 8 of 50
    Here's the key problem: Blockbuster is probably convinced that they would be combining the two companies' strengths to form an even stronger brand, when these are in reality two quickly failing businesses. If - IF - they started with the premise that both companies should be re-envisioned, from scratch, they might come up with something interesting. But there's no chance they'll do any such thing. I'd be shocked to learn that there were any radical thinkers at either Best Buy or Circuit City, and if there are (*someone* came up with this "revolutionary" idea, I guess) they'll get weighed down by board-mentality lameness quickly.

    If this happens, I expect a thoroughly half-assed effort.
  • Reply 9 of 50
    MacProMacPro Posts: 16,995member
    Classic case of 'Two wrongs don't make a right!'.
  • Reply 10 of 50
    solipsismsolipsism Posts: 25,726member
    I wonder if Blockbuster thinks it could do well to sell a limited supply of fast moving electronics and software in their BB stores. I can't really think of anything else.
  • Reply 11 of 50
    lkrupplkrupp Posts: 5,728member
    First the iPod and now the TV. Some forum posters are always poo-pooing the idea that physical media is on its way out for music and video. We hear all the arguments about how people want something to touch and possess instead of digital media stored on a server or local hard drive. If that's the case then why are outfits like Blockbuster and Netflix scrambling to save their business models by diversifying and going digital. It all stared with the iPod and now continues with the TV and similar technology. This is disruptive innovation in spades people. The music and movie industries, along with their retail partners like Blockbuster have been turned inside out. They're trying to turn back the clock but it's already way too late. The horse is out of the barn; the genie is out of the bottle thanks to visionaries like Steve Jobs. Yes, all this stuff was developed in the lab some time ago by others but it takes somebody like Jobs to make it actually work.

    Doesn't it seem rather pitiful to see articles like this one in which some company always has a plan to "take on" or "rival" Apple. For a company often declared as irrelevant or "niche" by pundits Apple sure seems to know how to rock the boat.
  • Reply 12 of 50
    buzdotsbuzdots Posts: 418member
    Originally Posted by AppleInsider View Post

    Last week it was reported the Microsoft is also mulling the prospect of opening a self-branded chain of retail stores to promote its Windows franchise.

  • Reply 13 of 50
    Two drowning industries reach for each other to go down together.
  • Reply 14 of 50
    This reminds me of the Kmart-Sears merger. Two failing retailers combine together... for what? To sell Kenmore appliances at Kmart? That turned out to be a huge flop at the Kmart near where I live in Los Angeles--and I'm in a nice part of the city. They replaced that entire Kenmore section with more sporting goods.

    And a note about Circuit City... I used to be a salesperson at a CC in Florida in the early 1990s. We had to undergo two weeks of intensive off-site sales training before CC would even let us out on the floor to talk to customers, much less sell anything to them. We had to know all our products in our department up one side and down the other, so we would be prepared for any question that would be asked.

    Years later, when I moved to California, I was appalled at the condition of the CCs I visited. No one on the floor knew a damn thing about anything. Unless you wanted a TV, the selection of products was terrible. I think this was about the time they instituted the "no salesperson will approach you" policy. I understand why people dislike overly aggressive salespeople (which we were not trained to be, BTW), but at least employ people who can answer a basic question. In English.

    This merger is doomed to fail.

  • Reply 15 of 50
    solipsismsolipsism Posts: 25,726member
    Originally Posted by lkrupp View Post

    Doesn't it seem rather pitiful to see articles like this one in which some company always has a plan to "take on" or "rival" Apple. For a company often declared as irrelevant or "niche" by pundits Apple sure seems to know how to rock the boat.

    BlockBuster isn't taking on or rivaling Apple here.
  • Reply 16 of 50
    Sure Blockbuster and Circuit City are faltering companies, but the idea of acquiring companies is a good idea in theory (if the right company is purchased and then this new acquistion is integrated correctly). As I and others have thought, why doesn't Apple just buy Tivo and Netflix to add to appleTV's capabilities and assume the direct leadership in the "new media" "wars." The internet (appleTV, Tivo, Netflix) is by far going to be the future access point for all digital media, so why not take a lead by buying a lead (buying, then incorporating Tivo and Netflix into apppleTV). All companies do this. Let's do it apple--I really want to "need" an AppleTV.
  • Reply 17 of 50
    Sounds kind of like Blockbuster wants to bring Circuit City in to merge the old (and long ago failed) Circuit City Express concept (which, last I knew, died back in the early-mid 90s).

    Dying rental company + Mostly mediocre electronics store = success?
  • Reply 18 of 50
    nofeernofeer Posts: 2,422member
    if blockbuster is looking at the apple model, it will want to put an Btv (blockbuster tv unit to counter iTV) and get it more retail exposure and floor space, maybe BB buys tivo? but to have an entire CC retail space, how to build it's business model which is dying a slow death. unless they see being a netflix/ apple type, namely make hardware optimized to BB downloads etc
  • Reply 19 of 50
    Tie two rocks together and they still sink.
  • Reply 20 of 50
    maxmannmaxmann Posts: 85member
    they are out of money.. this is a way to raise money from uniformed investors who think that the likes of BB and CC can penetrate the Apple business model.. they are just lacking a couple of things.. like qualified people to do it.. and products to compete with the model apple has put forth.. See sears as an example.. The idea is beyond silly as the same invested dollars could buy apple stock or .. if they have to do it their OWN way than they could at least copy the business model of apple and start from scratch. the dead weight of BB and CC is like so overwhelming nothing can ever happen that makes a profit worth investing in ..
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