Blockbuster attributes the decline to losing $145.3million in late charge revenue because the "No LateFees" program, spending $12.6 million in a failed bidfor Hollywood Video and increased investment in itsonline business.
Total rental revenues, which accounted for 71.4% oftotal revenues for the first quarter 2005, decreased4% to $1.11 billion from $1.15 billion for the sameperiod last year--again because of the "No Late Fees"program. "The decrease in extended viewing feerevenues represented a 12.6% reduction in rentalrevenues from the first quarter of 2004 and was theprimary driver behind a 5.5% decrease in worldwidesame-store rental revenues for the first quarter of2005," the company stated in a news release. However,the loss was offset by growth in base rental revenuesand an increase in rental transactions.
The entertainment firm managed to post total revenuesof $1.6 billion for the first quarter 2005, anincrease of 3% from $1.5 billion for the first quarter2004. The increase is the result of adding morecompany-operated stores and growth in retail sales ofboth movies and games.
Blockbuster's earnings fueled the dispute betweenBlockbuster chairman & CEO John Antioco and thecompany's largest shareholder, corporate raider CarlIcahn. During the quarterly earnings call, Antiocofielded questions from Ichan regarding the company'sloss. He contended that Blockbuster's investment inits online business and the implementation of the "NoLate Fees" program is critical to the company'sfuture.
"Everything we're doing, we strongly believe isessential if we are going to grow revenues,profitability and cash flow," Antioco said during thecall.
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