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Blockbuster CEO Has Answers

By Rick Munarriz - Updated Apr 5, 2017 at 8:00PM

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An interview with Jim Keyes shows his confidence.

I had an enlightening chat with Blockbuster (NYSE:BBI) CEO Jim Keyes yesterday afternoon.

We discussed what I perceived as threats to the DVD rental giant. With marksman's precision, he shot them down.

Getting to the point, the MediaPoint
I first asked him about the MediaPoint set-top digital delivery solution that his company rolled out last month. It was actually my sharp critique of the box -- where I called it "redundant, unnecessary, and ultimately inferior" -- that triggered the phone call.

I was expecting a blunt defense of the device. Instead, Keyes threw me a curve.

"We think there's like 100 people in the world that are really serious consumers of this," he joked, before taking a more serious turn. In his opinion, there are "legitimate limitations" of digital delivery at the quality level that consumers expect. He estimates that roughly 10% of the homes are equipped with the means and broadband speeds to make it viable, and he doesn't see that changing for at least another five years.

Having some skin in the digital game is important -- whether it is the MediaPoint box or the NCR (NYSE:NCR) machines that load Archos digital media players with flicks, which Keyes demo-ed during this year's annual shareholder meeting -- but it's still a niche market.

"Should we put shareholder money at risk in a market that's at best five years away from being commercial," he rhetorically asked. "I don't think so."

The evolution of celluloid
Blu-ray has extended -- and enhanced -- the life of the optical disc as a movie-serving platform. As an early adopter, I begrudgingly settle for a digital download in a pinch, but I prefer the quality, flexibility, and special features that come with a DVD or Blu-ray rental.

Keyes doesn't know if countrywide bandwidth will be there to digitally deliver quality movie experiences by the time Blu-ray discs run their course. He sees an opportunity to fill the gap, providing in-store servers loaded with high-quality releases that can be transferred to flash memory cards in 30 seconds. In the end, it's all about getting folks into his stores or even to potential Blockbuster kiosks at train stations and airports to serve up speedy celluloid.

He's the only one who sees it that way, and he relishes being a contrarian.

"Let everybody fight it out, kill each other, and spend lots of money on set-top boxes tethered to big screen TVs," he says. He prefers a portable solution as the heir apparent to the DVD, and one that hopefully entails a trip out to your local Blockbuster store.

More in store
Keyes' main goal is for Blockbuster to succeed as a media retailer. When I asked him if he perceives his biggest competitive threat to be Netflix (NASDAQ:NFLX) or RedBox -- the DVD rental kiosks bankrolled by McDonald's (NYSE:MCD) and Coinstar (NASDAQ:CSTR) that are popping up all over the country -- he dismissed them both.

"Neither RedBox nor Netflix are even on the radar screen in terms of competition," he said. "It's more Wal-Mart (NYSE:WMT) and Apple (NASDAQ:AAPL)."

It wasn't the only time during our chat that Keyes leaned on Apple as an aspiration. When I asked him where he sees the Blockbuster concept in five years -- if it will be more in the mold of 7-Eleven or Circuit City -- he pointed to Apple.

He's certainly not out to "out-Apple Apple" but it's a tech-driven vibe with plenty of hard-media goods and players that fit right into his vision of where Blockbuster stores -- Blockbuster Media, not Blockbuster Video -- are heading. He's also fond of France's Fnac and Japan's Tsutaya as media-based concepts worth paying attention to.

Ultimately, Keyes wants Blockbuster to be nimble enough to ride the trends of media consumption. This finds him placing many small bets in the near term, but he thinks reports of the death of the optical disc are greatly exaggerated.

"DVDs are a melting glacier," he said. "Yes, it's melting, but it's a slow melt."

Maybe Keyes is in the same groove, confident that by the time the DVD itself does erode away into the sea, Blockbuster will be paddling its way on a lifeboat to something bigger and better.

Come back on Friday, when I'll discuss Keyes' plans to be the master of all media.

Other blockbuster headlines:

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Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$137.51 (1.51%) $2.04
McDonald's Corporation Stock Quote
McDonald's Corporation
$249.33 (0.21%) $0.53
Netflix, Inc. Stock Quote
Netflix, Inc.
$602.13 (-2.33%) $-14.34
Apple Inc. Stock Quote
Apple Inc.
$161.84 (-1.17%) $-1.92
Coinstar, LLC Stock Quote
Coinstar, LLC
NCR Corporation Stock Quote
NCR Corporation
$40.34 (-0.84%) $0.34

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