Circuit City, you are not alone- said Best Buy

It was Forbes magazine's "Company of the Year 2004" and then it made in to the Fortune's List of Most Admired Companies in 2006. It survived the financial catastrophe after 2007 unlike its rival Circuit City, but seemingly it does not want to leave its pal- Circuit City alone.

Consumer spending has been above the levels businesses saw in 2008-2009. As per reliable sources, Black Friday and Cyber Monday sales of the year 2011 were up by 26% as compared to the year 2010. These all favor the prosperity of the retailers like Best Buy. But that is not the fact. Financial statements and stock performance of Best Buy deliver the different and dubious story.

Source: Yahoo! Finance

Best Buy is losing their support in the equity markets."Going out of the business" is a probability after 2-3 years and no one is able to put that out of the question. But why only Best Buy? My only explicable answer is:  "the fierce competition" from diversified retailers who have many other things to offer unlike Best Buy. Free shipping, heavy discounts and extended season of the deals cause only one thing and that is shrinking Best Buy's margins. I have no specific thing in my mind which Best Buy can do to come out of this misery, but if they are not able to do anything revolutionary, those shrinking margins will eventually burn all cash.

Few days ago, I read an article on Amazon, which was considered to be "Online store of Best Buy". I could not deny with that, could you? Because that sums up everything here...

Netflix confuses subscribers with a canny idea...

Price hikes. They are riding on the ECON 101 rule of growth and competitiveness in an industry. From my perspective, I was ok with paying half dozen bucks more a month after I heard the news couple of months ago. I think the money I pay for the service and access to the huge library I get is worth. But I am not on the same page with many of the 23 million domestic subscribers. We all do not need to be...

Reed Hastings, CEO of Netflix, sent an apology email to all domestic subscribers for the current pricing disappointment the company has given to their subscribers. The email also contains a brief on the company's plan to separate their streaming (Netflix) and DVD rental unit (will be named as Qwikster). Why? Why would they do such thing when everyone is still coping with the mess company has recently created? And I can imagine a canny idea behind this.

Internet access is ubiquitous. YouTube, Amazon Instant Streaming, Dish Network's acquisition of Blockbuster library and many more to come to share a pie of video streaming business. Growth is going to be good for next few years. Decline phase is not in sight. While the reverse is the destiny for DVD business which has sluggish growth forecasts and is going to be nearly unseen in next 10-15 years. In simple language, if weak outlook for DVD business persists, then Netflix (streaming only) is a better place to get handsome ROI than Netflix (Current: streaming + DVD).

"Wall Street to Netflix: Try Again". I read that on Twitter. After Hastings's public apology, share price tumbled further. So, a tweet justifies a stock market reaction to this event. But now I do not think alike. This seems like a smart move to me rather than pleasing the investors on day-to-day basis. Growth is not immortal. The more you extend your maturity phase, the longer you survive. And Netflix may have learned that already.

How long can you put on your 3D glasses?

When I graduated from high school, I and one of my friends went for IMAX 3D "show". I did not write "movie" because it was a 30 minutes educational/ informative documentary which we always find here in museums. It was expensive. And rare! Times have changed. Now every Friday, we get at least one movie in 3D to spend our wealth on.

Before 3-4 years, when releasing movies in 3D was not as normal as it is now, it started to change the definition of movie watching on the big screens. Stumbling Regal Entertainment Group & AMC Theatres during the painful recession got some room to breathe. Rapid rise of 3D movies boost the earnings for Regal Group, RealD and the hopes for an IPO for AMC. Entertainment sector was almost back on the track with the 3D hits like Toy Story 3, Avatar, Transformers and Harry Potter. Then AMC postponed their IPO plans. Why?

• 3D Burnout- Excess leads to an destruction. Well said! Burnout is the term often used during mortgage refinancing phase for prepayments. When rates are low, you refinance the loan by prepayments. After few years, when rates become lower again, you have nothing much left to refinance. Same applies here. 3D movies and its craze cannot be placed in the category of sustainable items.
• Online movie providers- Ah! Internet is killing everyone. Surge in the paid subscription based online movie providers like Netflix, Amazon, YouTube have clearly staged their competition with these entertainment giants.
• 3D TVs- Dance until music stops. And that is the reason why we can see the brand new isle of 3D TVs at Best Buy or Wal-Mart stores. 

RealD does many innovative things. It recently launches "Wimbledon 3D" for 2011 Grand Slam. Beautiful. Wimbledon 2011 is still in progress, but still RealD stock is suffering today. Why? It is because of less than expected, not poor, box-office performance of Cars 2 which also released in 3D during last weekend. It is a lovely example of positive correlation, isn't it?

Let's see how long we are able to witness the entertainment industry's fight against sustainability and volatility.