Best Buy Cuts DVD Floor Space, FYE Says They Will Profit from it - The UpStream

Best Buy Cuts DVD Floor Space, FYE Says They Will Profit from it

posted Sunday Jun 2, 2013 by Nicholas DiMeo

Best Buy has been in the news a lot lately. From cutting its workforce in August along with its retail footprint to posting an $81 million loss this quarter, trouble seems to keep up with the yellow tag store. This week, in the earnings call that the company announced the big loss in, Best Buy also said they will be shrinking the amount of floor space they give DVDs and Blu-ray discs. They, like many people, have discovered that people are buying physical media less and less, and have decided to - albeit a little late - actively do something about losing money in this area. So, who hasn't seen this radical outlook on the current state of the entertainment industry yet? FYE.

Yes, the company FYE, who has been closing stores down nationwide to a point where they don't even exist in some large markets, has decided to go the other route and instead expand its DVD section to cater to the customers who will be potentially ousted by Best Buy. With FYE posting a $1.8 million profit gain, $800,000 lower than the previous year's Q1, along with an almost $30 million revenue drop year-to-year, the company needs to take drastic measures to really stop the bleeding. And, with as many store closures as we've seen from them, you'd think it would be enough, but sadly FYE feels that this move will actually have them seeing more positive numbers moving forward.

Of course there are some stats to look at. FYE has seen a 6.6 percent drop, on average, in sales overall with each passing quarter. This, they say, is due to less foot traffic and very lackluster sales in the music department. For DVDs and Blu-ray discs, sales haven't even gone up a percent, but still make up almost half of the total income for FYE. So why bank on that category providing revenue and profit growth instead of closing 26 more stores? CEO Bob Higgins, said,

Video sales continue to be driven by strong sales of Blu-ray as competitors exit the DVD business, and the strength and depth of our (disc) selection provides us with a competitive advantage. We've always considered (Best Buy) our No. 1 competitor (in packaged media). We didn't get any impact in the last quarter, but I would expect that in the future we will.

I don't know how far into the future FYE will even make it in the first place. Some analysts are thinking FYE is genius for taking this tactic, but even rental services like Netflix and Redbox are seeing a decline in physical disc rentals, especially now that even Redbox has moved to video streaming. What do you make of this? Is this a smart move for FYE? Sound off in the comments below.


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