Blockbuster Wins Antitrust Case

Blockbuster, Inc. has won again, in something of a replay of last July's dismissal of an antitrust suit brought against the company in San Antonio, TX.

On Thursday, February 21, Los Angeles Superior Court judge Victoria Chaney dismissed a lawsuit by approximately 200 small, independent video stores accusing Blockbuster of trying to drive them out of business by negotiating exclusive contracts with movie studios. Chaney stated that the plaintiffs failed to prove that the defendants—Blockbuster and several Hollywood studios—conspired to strike favorable deals not available to other video stores, or that the studios had used their knowledge of each other's businesses to make similar deals with Blockbuster. Chaney's ruling should put an effective end to the litigious pursuit of Blockbuster, the world's number one video chain, according to attorney Edward Stead.

In the Texas case, now being appealed, a federal judge similarly found no compelling evidence that Blockbuster and the studios colluded to shut small dealers out of better pricing arrangements that were available to Blockbuster because of its dominance of the rental market. Blockbuster signed revenue-sharing agreements with the studios in 1997 and 1998. In that case, two studios—Metro-Goldwyn-Mayer and Warner Bros.—settled out of court last year for about $15 million.

In recognition of the growing popularity of movie purchases, Blockbuster has been busy revamping itself as a DVD retailer rather than as a strictly rental operation. The video chain and its closest competitors, Movie Gallery and Hollywood Entertainment, last year saw their stock get hammered down as investors panicked over a downturn in rentals. Recently, however, the investment community has begun to look at video chains more favorably, according to Georg Szalai of the Hollywood Reporter.

The video business is actually "alive and well," Szalai reports. With Hollywood Entertainment posting improved fourth-quarter profits, analysts are seeing other signs that the business is still alive and well. "It was an overblown reaction to write off the whole industry overnight," analyst Kavir Dhar said. In January, the Video Software Dealers Association reported that the industry had its best year ever in 2002, with DVD sales lifting total revenue near the $20 billion mark.