Blockbuster and many others in the traditional movie rental vertical have been under pressure with the digital revolution. But Blockbuster (bbi) buying Circuit city (cc) for $1.3 billion….what could be the underpinnings to such a deal? Apparently, Blockbuster is paying compliments to Apple by copying its’ business model of hardware and content in the living room equals money.
Rumor has it Blockbuster is coming out with a setup box (like we need another one), that would certainly explain the Circuit City purchase. I can see two compelling reasons for this; first CC offers the hardware and manufacturers that would enable such a feat and two CC certainly has the retail outlets and distribution channels. According to ECT (full story there) the purchase represents a 54% premium. The clear and present danger reportedly is coming from BestBuy, Apple and discounter Walmart. The quote for the acquisition has been pulled from ecommercetimes below (I took the liberty to highlight the business jargon used for these type of M&As):
“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,” Keyes said. “We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements as well as cost synergies.”
For those of you not versed in M&A business jargon I will attempt to translate:
“In case you haven’t been keeping score, we have been getting our A*S handed to us by Netflix, you got a better idea?”
For those of you wondering why this made StartupAddict Musings the answer is simple….disruptive technologies and bold business models like Netflix (NFLX) cause traditional companies like Blockbuster to make long-term strategies to survive and that is the business DNA startupaddicts are made of.