What's So Great About Blockbuster?

Bankruptcy reorganization has apparently done wonders for its complexion.

DISH Network's (Nasdaq: DISH  ) Blockbuster is now in a legal tussle with ATM giant NCR (NYSE: NCR  ) over the Blockbuster Express kiosks. DISH wants the licensed trademark back, just as NCR is populating the country with more of its disc-spewing automatons.

How did we get to the point where two brutes are tugging at a brand the way that Popeye and Bluto pull at Olive Oyl?

Let's go back a few DVD chapters.

Blockbuster Express was a godsend to the previous incarnation of the DVD rental chain. NCR agreed to bankroll the unmanned machines, licensing the Blockbuster Express brand from the debt-laden flick retailer. Without having to crack open its wallet, Blockbuster was able to take on Coinstar's (Nasdaq: CSTR  ) Redbox with nightly rentals for a buck.

NCR's reputation and Blockbuster's brand were a potent combo for retailers seeking an alternative to Redbox. Duane Reade, QuikTrip, and several other regional grocery and convenience store chains rented out store space to NCR.

Blockbuster's bankruptcy and new ownership hasn't slowed NCR down in its efforts to catch up to Redbox.

It just struck a deal to place 800 Blockbuster Express kiosks in Delhaize's (NYSE: DEG  ) Food Lion supermarkets. Three months ago it inked a deal with gas station operator RaceTrac to place 309 of its machines.

I'm no legal eagle, so there won't even be an attempt to handicap this licensed trademark battle on my end. I will only argue that NCR must be doing well with the kiosks if it continues to expand this aggressively. Would a name change really be that detrimental?

Blockbuster stores continue to close around the country, and lay consumers may not know the difference between bankruptcy reorganization and an outright liquidation. In other words, the licensed trademark may be more of a liability than an asset to NCR. Using Blockbuster's name may have been a great way for NCR to shoehorn its way into retailers a couple of years ago with an unproven concept, but the time is probably right to shed its Blockbuster Express skin and complete a rebranding.

Netflix (Nasdaq: NFLX  ) and Coinstar have validated budget rentals as a viable and lucrative niche. There's no reason why NCR can't become the third major player here. It's probably better off drumming up a proprietary label than championing a third-party brand that is now owned by a company whose intentions aren't entirely clear in this space.  

Have you ever used a Redbox or Blockbuster Express kiosk? What did you think? Share your thoughts in the comment box below. 

Motley Fool newsletter services have recommended buying shares of and buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz can't remember the last time he went into a video store for a rental. He does not own shares in any of the stocks mentioned in this story, except for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On June 10, 2011, at 7:45 AM, WhiteHatBobby wrote:

    If Dish gets some licencing fees and co-branding, it could result in NCR and Dish on other business issues.

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