Wednesday, 30 October 2013 15:31

Online streaming has Blockbuster screaming (again)

It seems only fitting that Halloween week should be the moment when Blockbuster Video - one of the UK's biggest zombie businesses - reveals that, for the second time in ten months, it is lurching back into the corporate graveyard.

Zombie businesses are those that are only just surviving, but would be unlikely or unable to continue to do so if there were any kind of substantial shock to their ongoing operations.

That pretty much sums up Blockbuster's situation, as current owners Gordon Brothers Europe have been unable to bring the company into the 21st century; former US parent company Dish still own the digital rights to the brand, and competitors like LoveFilm, Netflix and Sky have already cornered the British market for streaming films.

Verdict Retail associate entertainment analyst Mike Perry says: "Its proposed turnaround strategy was flawed from the start, as it included branching out into selling physical media including CDs and DVDs/Blu-rays - items that fewer and fewer people are purchasing, particularly from bricks-and-mortar retailers. Just ask HMV."

Mr Perry adds that Blockbuster is "trapped in the past" due to its inflexible business model, which seems to have doomed it to the high street graveyard that has been the destination of so many other major brands in recent years.

Home entertainment horror stories

While people speak of the retail sector as being the hardest hit by the recession, the biggest horror stories have come from the home entertainment niche - from hardware retailers like Comet and Jessops, to media brands like HMV and Blockbuster.

In these situations, the concern from a credit control point of view sits with suppliers, who may have provided goods for sale as part of a credit agreement.

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This is what happened with Comet - and it was suppliers pulling the plug that proved the final nail in the coffin for the brand, although few could blame them for doing so.

Being aware of zombie businesses in your supply chain can give you a headstart on the competition when the first signs of contagion begin to appear; remember the old adage that if you're going hunting, you should always take somebody you can outrun.

The walking dead

Interestingly, there is some promise to be found in Blockbuster's tale of woe; after all, the brand has survived a further ten months under its new ownership, which is no mean feat with 264 stores and 2,000 employees to support.

If you are the owner-operator of a zombie business, take heart from the fact that keeping a careful eye on your cash flow - the lifeblood of any company - could allow you to weather the storm until your finances return to a healthier state.

Be watchful and wary of your own suppliers and customers, and minimise your credit risks, to avoid suffering a financial shock that spells the demise of your brand.

Keep the cash flowing in - but ensure that you meet your debt liabilities promptly too - and you can give yourself the best chance of recovering your stability without facing a winding-up petition due to unpaid amounts owed.

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