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Blockbuster Blunders Its Q2

DALLAS-Blockbuster's elimination of extended viewing fees and unrivaled Internet competition results in a disappointing Q2.

By Dana Dubriwny | Updated on August 09, 2005

DALLAS-The elimination of extended viewing fees under Blockbuster’s No Late Fees program negatively impacted rental revenues by almost $140 million in the second quarter of 2005. But in its Q2 earnings release, the company was quick to note that the fee loss was largely offset by a 9% increase in base-rental revenues, as well as a 10.4% increase in rental transactions.

After the demise of its No Late Fees program, the company was forced to retract its 2005 guidance, blaming the uncertainty and continued decline in the rental industry. The company says it is “no longer on track to achieve this guidance and is unable to forecast 2005 results with reasonable certainty.”

On Monday, the blockbuster also amended its credit facility to provide for a waiver of certain financial covenants for the second and third quarters of 2005. Without the waiver, the company said it would have been in default of the leverage ratio covenant for the second quarter of 2005.

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