Blockbuster plans cuts, 3Q loss widens

DALLAS Following a less-than-stellar third quarter perfomance, Blockbuster today announced that it is taking steps to improve profitability by cutting staff and streamlining operations.

The company said that it has implemented a plan to reduce annualized overhead costs by approximately $45 million through the elimination of staffing and operational redundancies in the company's in-store and online corporate support structure and through improvements in other operating efficiencies. The company said it is also considering the idea of outsourcing various corporate functions.

The company also announced that during the quarter it implemented pricing modifications to the Blockbuster Total Access offering, reduced advertising spend and minimized promotion of the program in its stores. According to the company, these actions significantly reduced the number of unprofitable Blockbuster Total Access subscribers, improved profitability across the remaining subscriber base and contributed to a sequential improvement in the Company's operating results from the second quarter of 2007.

Blockbuster added that going forward it will focus on its total membership, rather than highlighting its online subscriber count alone.

For the third quarter, Blockbuster reported that total revenues decreased 5.7% to $1.24 billion for the third quarter of 2007 from $1.31 billion for the third quarter of 2006. For the third quarter of 2007, net loss was $35 million, or 20 cents per common share, as compared with a net loss of $24.7 million, or 15 cents per common share, for the third quarter of 2006.

Despite its third quarter results, Blockbuster remains confident in its future, according to Blockbuster chairman and ceo, Jim Keyes. "Going forward, we are focused on protecting our core rental business, developing new retail opportunities, and becoming the preferred provider of digital entertainment. To this end, we have launched a series of initiatives centered around product availability and increased emphasis on our retail business. I am pleased with the progress we have made both strategically and financially and believe we are on our way to transforming Blockbuster into a company that is able to generate total revenue growth, effectively redeploy resources and balance investment in a manner that delivers favorable returns."