Davis Freeberg

Blockbuster Streaming Comes To TiVo, But Service Won't Reach Many Consumers

That's just it, your hang up on the number of devices is preventing you from seeing the real trend that happening. Let forget a minute about when we get to the future and look at this news from the context of how we get there. On it's own, the announcement is nothing new, nothing revolutionary and as you point out only available to a small audience, but the ripple that these decisions make is very exciting. TiVo may only have a small stand alone base, but there are a lot of DVRs out there and they've clearly been in front of many trends. Online scheduling, TiVo to Go and support for online video are a few things that consumers can get, if they actively seek it out. This makes it harder for the other 25 million DVRs to continue to keep their systems closed. Maybe it means that they start experimenting with cable everywhere or approved video content like Epix, but sooner or later they will have to respond.

From the perspective of Blockbuster, the arrangement highlights their willingness to not be exclusive. Earlier their digital strategy was to build a Blockbuster only box, now they are competiting on the same platform as Netflix, Amazon and the whole internet. It may only be an early example of this, but other Blu-Ray manufactuerers and connected TV makers will look at it and say hmmm maybe we can offer multiple choices for consumers instead of just one. This is very different from the cable only model where they absolutely want to be the only provider.

What the agreement really means for consumers though, is that they can now get Blockbuster digitally without having to buy special equipment. If they own a TiVo, it's there whether they are a potential customer or not. It's like Blockbuster was able to open a new video store without the cost of rent, staffing and what not. Maybe it's only 50,000 buyers, but how much does that cost them to replicate in real life? As more and more HARDWARE devices start supporting digital video it will drive demand for streaming services. Right now, it's all experimental, but if you look at where we are in the microchip area, we'll see a handful of connected tvs come out this year, but a healthy percentage of them coming out in 2010. Eventually most TVs sold will include an internet connection and that is what's so exciting about all of this. Consumers will have these choices presented to them when they buy products that they are already consuming. It's not a revolution as much as an evolution. Blockbuster's ability to show that it's committed to competing on these platforms opens up new video stores among each partners. So what if Samsung only ends up selling a couple million Blockbuster enabled TVs, it will still be allow Blockbuster to offer content to a community that wouldn't otherwise seek them out. When does the future happen? I'd argue that this is just a glimpse but that in two years, the majority of electronic devices will be connected and those passive consumers who've been reluctant to try digital delivery will finally understand the potential.

Blockbuster Streaming Comes To TiVo, But Service Won't Reach Many Consumers

You are missing the forest for the trees. For someone who is so up to date on the future of video, you seem to misunderstand the potential for hardware. For so long a small handful of companies have controlled tv content. Now that linear television is being challenged, strategies must change to be successful. The broadcast networks of the future won't be restricted to certain areas like cable is or have to worry about time slots because it's all on demand. Ushering in this change is a mass proliferation of devices and solutions. It may only be 1 million subscribers that Blockbuster can reach, but those are subscribers who aren't as likely to go to a video store and who wouldn't shop with Blockbuster otherwise, if they didn't go to the customer. When Netflix launched support on Blu-Ray players how many people who bought the Blu-Ray were actually customers? I'd argue a very small percentage when you look at Netflix's overall penetration rates, but each device that they partner with introduces them to another series of micro audiences able to consumer their content. Whether we're talking about the Xbox, Roku or TiVo, these devices start to add up. You can be unimpressed by Blockbuster's entry into the consumer electronic world, but don't overlook the significance of this change in strategy. They may be a year or two behind, but this sort of partnership will be what end up defines digital video.

Blockbuster Could Collapse in 2010

These comments are just plain funny. Decline has stabilized, I'm still laughing about that one. Considering that last qtr showed a 30% decline, I'm not exactly sure that stable is the word that I'd used to describe it. As far as the 50 million goes, this was only reduced because they reduced their lease obligations by $50 million to, so it shouldn't help Blockbuster at all. Not sure what Jodati is talking about from a 10% growth rate, but his math is clearly suspect. In 2004, Netflix had 2.1 million subs and Blockbuster hadn't even launched their online program yet. By my math this means that we've seen 500% growth in the DVD by mail category, not the 10% that Jodati seems to calculate.

As far as it being "reckless" to insinuate that Blockbuster won't make it past 2010, I'd say it's reckless to insinuate that they will. Until someone can tell me how Blockbuster plans on raising $500 million between now and then, I don't see how bankruptcy is avoidable. It'd be one to refinance debt, but at 40+% interest rates how the heck are they going to do that? Not sure that Netflix shareholders have anything to do with Blockbuster's stock price, but I will point out that Mark Wattles started selling his stake 2 weeks ago, which would certainly depress prices. Wattles also got out of Movie Gallery right before they went bankrupt, so this may be something to consider. Since he has 9% of Blockbuster's debt outstanding, it might give you a clue at how the smart money is investing in the company.

Blockbuster Hemorrhaging DVD-by-Mail Subscribers

Good luck day trading your penny stock, but if you're reading my articles you should know that I don't concentrate on the short term and instead take a longer view on the companies that I write. You argue that there's no point to the fact that their by mail subscribers have gone into shock, but you're wrong because it is the only hope that Blockbuster has left for saving itself and if they don't have the resources to keep it competitive, then they have already lost. Over the next year, they need to come up with $500 million to pay off their debts. Where do you think that they will get that from? Their international operations certainly aren't worth that much, even stretching out payment terms and reducing spending will yield a little bit of operational cash flow, but no matter what they do, they're still going to have $300 million that they don't know how to pay back.

They can try to refinance, but with these bonds at 43% yields, how much luck will they have? I would argue that their only way to save themselves is by selling a core asset that's worth at least $500 million. The problem is that 2 - 3 million growing subs would be worth that much as a stand alone company, but 1 million subs and declining would not. So what's my point? It's that the "healthy" part of their business that could have given them an exit is now a closed off ramp. That should impact their long term ability to function and remain competitive in this space. So maybe it's not new news that Blockbuster is toast, but since you are the one whose long, why don't you tell me how you pay off $500 million in 12 months?

You'll note that in my article, I don't discuss valuations at all. You can go through life tracking every single tick of the tape or you can get way ahead and identify problems or opportunities that aren't clear to others. You can act like Blockbuster can be saved by a few cents added to their stock, but I don't see how that helps them grow, protect or save their business from impending disaster.

Blockbuster Hemorrhaging DVD-by-Mail Subscribers

@Jodati - I'm not worried about Netflix's future growth, they're continuing to add subscribers at a record pace. Once the video stores closes it will force a lot of people to online only, but to address your point . . . when Blockbuster was touting their 3 million mark, Netflix had 6 million subs. Now Blockbuster has 1 million and Netflix is pushing 11 million. From where I sit that's 35% growth for the industry over a pretty short amount of time. If Blockbuster can't execute in these types of conditions, how are they expected to succeed with 30% of the video store business leaving every year?

Views from Netflix's Annual Shareholder Meeting

Great recap, thanks for attending and reporting back. In regards to your question about lack of subtitles, I believe that this is a restriction because of the codec they are using. Since the studios control the DRM, there is only so much that Netflix can do about this. I know that prior to going to Silverlight they weren't able to include surround sound via streaming either, but that was taken care of in the upgrade. Not sure what Microsoft could do to allow subtitle support in Silverlight, but this issue is a lot bigger than Netflix. As far as Starz play goes, I think that you hit on a sensitive topic for them.

A lot of cable companies are concerned about Netflix siphoning off their members, so it may be better for his relationship with them not to comment. What I will say is that 10 million members gives them more leverage than you give them credit for and the fact that Starz plays is a partner (previously they were a competitor via Vongo), it's shows how valuable those 10 millions subs are. As the subscriber base grows, we'll see even more streaming content from premium channels like Showtime (who premiered a show on Watch Now this weekend), HBO and other cable channels who have the exclusives on their TV and movies.

There will probably always be issues with content getting pulled after it went up, but with most people having over 20% of their queues available via watch now, there should be enough content leftover to keep the service compelling.

A Newspaper Publisher Lies

I thought "who does he think he is a blogger?" was a pretty good zing too.

China Sky Confusion: Management Is Flying in Circles

I'm not sure what Balabanovj is talking about. Asensio's record speaks for itself when it comes to his short selling. There are only a small handful of firms that I can think of, who've matched his consistency when it comes to unrooting fraud. To ignore the points he raises, just because he's bet on the do not pass line is a very dangerous game for investors to play.

I haven't listened in to any of the CSKI's conference calls yet, but I do find some of these numbers pretty unbelievable. It would be one thing if CSKI was doing less than a million in sales per year, but it seems highly unlikely (to me) that a business could generate CSKI numbers with such a consistently low inventory on hand.

Add to this the troubled history of auditors and the sketchy backgrounds of the people who created the company and I think that you have a compelling argument that they are cooking the books. Instead of seeing critics attack Asensio's credibility for being short, I'd like to see someone attack his argument and provide a rational explanation for how CSKI's accounting makes sense?

TheStreet.com Earnings: Intrusive Ads Are Sinking Site

The street drives me nuts because they have a lot of short articles that they insist on breaking up into five pages. It probably helps them serve more ads, but like you mention in your article, it also creates an environment where readers don't come back. It's also really annoying when they write some kind of fluff piece on a company that you are interested in and then make the second half of the article members only. If they really had any profound to say, it might be worth paying for a subscription, but when it's clear that they are trolling for search hits, bombarding you with ads and then asking you for money, it seems a bit heavy handed.

Felix Salmon would like to see bankers spending more time in Vegas: "Not because junkets are good for the economy, as Ben Stein might have it, but rather because it gets the gamble out of their system, leaving them sober when they get back to work in the real world."

I'm not sure that I agree with the logic on this one. Winning in Vegas can reinforce gambling behavior.

A highly-placed source (old high-school friend) in Redmond hints Microsoft (MSFT) is planning to undercut IBM (IBM) and buy Sun (JAVA). Then Bill and Steve will hand McNealy his pink slip, with a plaque saying, 'Debug this, Java Boy!.'

Personally, I almost always prefer to have sites open in the same tab, but only because it's so easy for me to right click and hit open in new tab when I want to stay on the page that I want. Normally, I don't even notice this, but from the perspective of a twitter user, I've noticed that typically I'll click once to get through from Twitter so I can read the entire short message and get the link, then a second time to read the link, then a third time to close the extra browser and then a fourth time to get off of the SA page because there isn't really all that much extra content on the Market Currents page. This is even more noticeable when I click on the link and it goes to another SA article, so now I have two SA articles up on my browser. It's not really all that big of a deal to do so much clicking, but sometimes less is more. If I was visiting Market Currents from the homepage, it'd be less noticeable, so I might not even mind, but more times then not, I prefer to have the option of choosing.

A highly-placed source (old high-school friend) in Redmond hints Microsoft (MSFT) is planning to undercut IBM (IBM) and buy Sun (JAVA). Then Bill and Steve will hand McNealy his pink slip, with a plaque saying, 'Debug this, Java Boy!.'

This is a bit off topic, but is there anyway that you could change the link code on the market currents so that it doesn't open up a new tab when you click on the links. It just seems a little awkward because you click through on Twitter, but are then left at SA when you use the links. I've never noticed this with the regular articles, but because just about every Market Current includes a link, it's much more noticeable.

DivX May Be Over Before It Finishes What It Started

I'm not sure what being long or short would have to do with any of the issues raised in my article, but I've never held a position in DivX one way or another. I do think their technology is pretty cool though and would like to see the company move past this and succeed.

Exploring the 'Nuclear Option' for This Crisis

You may think my argument silly and delusional and you're free to write me off, but this post was more about generating a discussion around the impact of such an extreme move, then a serious argument for nuking all derivatives. Clearly killing off all options would never happen, in part because the financial services industry would make sure it never happened if the idea did take root, but also in part because there are legitimate needs for investors to protect themselves. What I am hoping for, is to generate a discussion around A.) are these contracts good for the market given what we've learned about leverage. Why should we even give someone a bazooka, when a hand gun can get the job done and bring more capital to real businesses and assets? How should these devices be regulated to reduce speculation while allowing investors to hedge? B.) If we did take such a drastic step and hit that little red button, what would be the impact on the economy, the banks, and the monetary system. As some have pointed out, maybe it wouldn't be $500 trillion injected into the real economy, but something closer to $50 trillion based on notational amounts and what not. Still sounds like a lot of stimulus to me. C.) Generate a discussion around CDS and options and whether there are things that we should be considering to introduce safeguards. From the start of the financial crisis, there's been a lot of discussion about how bad CDO's are, yet we still haven't seen any regulations protecting investors. I understand if you want to write me off as naive, but understand that my idea is less of a magic bullet and more of an academic exercise.

Exploring the 'Nuclear Option' for This Crisis

You certainly raise a good point. To a certain extent my proposal is a little bit tongue in cheek. More then anything I was hoping to get a better extent of what would happen if we did end option and CDO trading. Would the market see it as a stimulus for the underlying assets or would the impact be so devastating that it would put all banks out of business? I don't know the answer and I'm not convinced 100% that either would necessarily occur, but appreciate your take on the idea.