The Washington Post has a unique article on the idea of Blockbuster merging with big-box retailer Circuit City. With both company’s shares losing a great deal yesterday and today analysts are skeptical why the deal has been presented in the context of “digital convergence” when Circuit City has such a limited online presence. Doug Anmuth, Lehman says:

“The acquisition of a major retail chain also highlights the growing divergence between the strategies of Blockbuster and Netflix. While both are aiming to be preferred destinations for media content, Netflix remains largely a by-mail DVD delivery service that is making the slow but ultimately critical transition toward digital delivery. The potential BBI-Circuit City deal emphasizes Blockbuster’s focus on traditional retail and could move Blockbuster further away from the DVD-by-mail business.”

Netflix online Video Streams

The deal would allow Blockbuster to reduce it’s retail space overall while maintaining brand presence in communities. The future for Blockbuster is digital downloads and kiosks set up at retail locations specifically for those downloads. Is Circuit City really the right direction for the video rental chain to go? Digital downloads might still be in their infancy but would investing heavily in retail locations and diversifying their product so much be wise for the struggling retailer? Frankly redbox  and DVDPlay movie rental kiosks already appearing in grocery stores around the country are beating Blockbuster to the punch. They might have experimented with the idea but failed to follow through.

Maybe Blockbuster has been spending too much time thinking of a way to justify taking over Circuit City that they’ve lost sight of their long-term goals.


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