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The courtship began in December with heady bids, chocolate kisses, and flowers. Blockbuster, the movie rental leader was set to hitch Circuit City to it’s star. Making its overtures public on Monday with an offering reportedly worth nearly 1 billion dollars. There were talks of crossing platforms with Circuit City renting movies and Blockbuster selling home electronics. And a day later there were talks that it would never happen. According to published reports, questions about how Blockbuster, a company valued at less then their initial offer to Circuit City would finance such a deal arose. My guess was late fees (I swear I returned that copy of A New Hope and I will fight those charges to the death!) but apparently the pot just didn’t have the gold. So in this post possible merger world how will these companies survive?

While Circuit City will likely lumber along, fighting Best Buy and of course Wal-Mart for market share Blockbuster may be finding itself at a crucial turning point. Remember it was the Dallas based rental chain that sought to align with Circuit City, not the other way around, which begs the question, who will Blockbuster try to gobble up next and what exactly are they trying to accomplish? A small sized retailer in terms of square footage, Blockbuster does have the presence with more then 7,800 retail outlets worldwide to get somewhat creative with its offerings and use of that limited square footage. For instance my local Blockbuster dedicates a sizeable percentage of it’s floor space to older movies, and classics, could those go away in the name of flat screen televisions, video game systems, and digital music players? It is not known, what is known though is that Blockbuster has now clearly demonstrated a want to expand into that realm, in this economy one has to wonder why?

It has been nearly four years since Blockbuster threw its hat into the by mail rental market, clashing swords with Netflix both in that realm and in the courtroom. More recently Apple entered the rental fray by offering 24 hour downloadable rentals of hits and new releases on its iTunes service. Other companies like Redbox and DVD Now offer DVD rentals through automated vending machines positioned in supermarkets, shopping malls, and even McDonalds illustrating another way that the competition, through innovation and creativity seeks to knock at Blockbusters door. In such a climate one wonders if Blockbuster would be better served diversifying within its own market through innovation and a nimble approach that emphasizes service and convenience for accessing movies and video games, resisting the urge to grow outwardly, an urge that has lead many to implode. Sometimes a house cat just can’t become a lion.

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