NEW YORK — Shares of Blockbuster tumbled more than 7% Monday on a new round of investor jitters that the growth of video-on-demand heralds an uncertain future for the video rental chain. It’s a worry that periodically plagues the stock even as VOD struggles at the starting gate and Blockbuster revenue continues to rise.
The stock fell $1.60 to $20.35 after a story in financial weekly Barron’s revisited Blockbuster’s ultimate vulnerability to a gradually changing marketplace. Some on Wall Street noted that Blockbuster, whose shares have soared from under $7 a year ago to more than $20, were overdue for a correction.
That’s partly due to Blockbuster’s own hints that it may abandon or restructure video revenue sharing deals as higher-margin DVD rentals become an increasingly big chunk of its business.
The Barron’s story was prompted in part by an agreement among five film studios earlier this month to collaborate on a system to deliver video-on-demand over the Internet. The move implies that Hollywood studios, which have made a bundle in revenue sharing deals with Blockbuster, may be getting serious about VOD. However, true VOD, according to many Wall Streeters and industry players, still remains years away.