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48 hours after HMV, it's Blockbuster UK's turn to throw the towel

Barely 48 hours after the UK's largest high street CD/DVD/BD retailer HMV began bankruptcy procedures, it is the turn of video rental specialist Blockbuster UK to call in the administrators.

With the closure in 2009 of the 807 stores of Woolworths, the pioneer of the British retail video market, the demise of HMV and Blockbuster make this one of the grimmest periods in the history of the UK high street as retailers face up to the prospect that they might no longer compete with digital competitors.

Warning signs had been flashing for some time above Blockbuster, impacted by the growth of online film rental companies like Lovefilm. Blockbuster UK employs almost 4,200 staff and operates 528 stores.

Deloitte, the appointed administrators, believes the core of the business is still profitable and the company will continue to trade as normal in both retail and rental whilst they seek a buyer for all or parts of the business as a going concern.

Unlike at HMV - with 239 stores and 4,120 staff - gift-cards will be honoured at Blockbuster stores.

"This is a bad start to the year for video entertainment," says Lavinia Carey, Director General at the British Video Association. "Like HMV in sales, Blockbuster was the last significant specialist rental retailer, whose stores had 32% share of the rental volume in 2011, down from 35.6% in 2010, in a market that is being challenged by digital video models that are starting to fulfill consumer demand amongst younger viewers with connected devices and those with smart TVs via internet services."

Carey continues: "Although video rental stores have declined in number in the last 10 years, when there were several rental chains in the UK apart from market leader Blockbuster, generating over £500 million in consumer spend and 86% of that on physical formats, in 2011 consumers were still spending £464 million on renting video, but by then it had declined to 59% physical and 41% on digital video rentals. Nevertheless, Blockbuster still has significant market to fulfil, with 8.8 million people saying they rented a disc in 2011, according to Kantar Worldpanel."

As for HMV, BVA data shows that it has held its share of around 16% of volume video sales over the last 10 years, while total market sales rose in the same period from 169 million units to 179 million units. Meanwhile, internet sales have gone from 8.5% to 30% in 2012, but in terms of consumer spending on discs, the internet has taken a larger share of the value, with 19% to HMV and 36% online.

Kim Bayley, Director General of the Entertainment Retailers Association, was keen to put the record straight. "There has been much misinformation published in the past 24 hours about the relative strength of physical and digital entertainment formats. Physical formats like CDs and DVDs still account for three quarters of the entertainment market. In other words, HMV going from the high street is in the interests neither of consumers nor of suppliers."

The disappearance of Blockbuster is another stab in their back.

Story filed 16.01.13

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