The word is coming down from above that, due to expanding price structures and a lousy economy and the need to cover stock options that prices at the popular chain store will have to go up.  Here’s the word from Studio Briefing:

Blockbuster plans to focus on in-store sales and rentals and is likely to boost prices to support store refurbishments and increased stock that will cost it some $20 million, Blockbuster CFO Thomas Casey has told a consumer conference in New York. “It’s reasonable and fair to understand that for what costs us more money, we should charge more,” he said. As reported by Video Business on its website, Casey indicated that a large percentage of new revenue will come from increasing rental fees for Blu-ray discs. “You have to figure out new ways to be fully in stock on Blu-ray because of the [higher] wholesale price,” he said.

First, yeah.  Blockbuster stores require serious refurbishment.  Have you been in one lately?  Even the newer ones look like thrift shops with all the various movie / video game / electronics material they’ve got taking up rack space for days.  And the old ones just look like hell, frankly.  Boxes are sunbleached and in many cases illegible.  One I’ve been in has an unpleasant but unidentifiable smell.

And yes, the CFO’s got a point that higher prices to the company generally result in higher prices to the consumer.  Generally.

See, what the CFO seems to have FORGOTTEN in his mad rush to personally restamp every item in every store with a thirty percent markup is that that strategy is really only applicable in two circumstances:

1. When the target market has sufficient discretionary income to not notice price increases.

2. When value increases sufficiently to justify a price increase.

This is like Microeconomics 1, here–at least what I remember of it from six years ago.  The problem is that circumstance one is pretty much shot since a disturbingly high six percent of the country is unemployed (the generally accepted nominal unemployment is four percent), and plenty of local unemployment rates are worse.  Meanwhile, circumstance two is shaky at best.  The problem here, of course, is that Blockbuster has plenty of competition.  Large-scale video stores like Hollywood Video and Movie Gallery compete in the bigger cities.  Everywhere you care to name has a local affiliate.  Smaller towns are generally the province of the mom-and-pop store.  And of course, looming in the background are the ever present Netflix and upstart Redbox, among a host of other purely downloadable services.

Blockbuster jacks up its prices, no one else does, suddenly everyone else looks better than Blockbuster.

And this spells a bloodbath for Blockbuster.

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