Best Buy announced their plans to abandon their direct relationship with entertainment and has begun taking actions such as closing its entertainment distribution center in Indiana. The spin doctors at Best Buy have done a nice job in downplaying this story, because the implications are huge.
What it means
Best Buy is handing over their entertainment business to a third-party provider that will essentially sublease the space in Best Buy stores. Sure, you can still buy CDs, DVDs and BDs. But, a company called Anderson Merchandisers will run the CD/DVD/BD categories.
- Best Buy was the only traditional US retailer that was involved in UltraViolet. Now that Best Buy has ditched entertainment, I see no reason why they would maintain membership. What’s the point of signing up for membership fees, operational costs and the list of issues that I have spoken of here? Ultraviolet will lose the only US retailer that has a store presence to explain to customers what UltraViolet is all about. That will be a big blow.
- Anderson Merchandisers….They do the same thing for Wal-Mart stores! Isn’t that rich. So now Best Buy has not only left the business, but they have given it away to their mortal enemy.
- With Best Buy out of the picture, the studios and labels have one less player in the mix to cut deals and use as leverage in negotiations with other companies. I’d hate to be in a sales role for a studio or label. Just think of the terms that Anderson/Wal-Mart will be able to extract. That makes my shoulders tense up just thinking about it.
- Napster and CinemaNow have an uncertain future. These are fairly recent additions and represent Best Buy’s efforts to do something in the digital space. With Best Buy leaving entertainment, I’m not sure why they would continue running these businesses.
- Job loss at headquarters. In addition to the 301 jobs lost at the distribution center, many people will be impacted at HQ. I bet the total number of people is close to 400. Ouch. To date, some high profile entertainment leadership has left, and I am sure more are considering.
I am very surprised that nobody has talked about the implications. Best Buy’s move demonstrates that entertainment retailers continue to struggle, while savvy companies downplay the seriousness of it all. But let the entertainment industry beware: there is no foreseeable calm in these troubled waters.