Video Rental Follies

It's ben a busy week in the video rental industry ...

Last week, I bought into Blockbuster video, after the press got wind of Netflix's unilateral decision to dump "profiles," one of the few features that gave the firm competitive advantage in the industry and Movie Show Video, its main brick-and-mortar competitor, announced a desperate restructuring plan to stave off its creditors.

While Movie Show is still speeding downhill, Netflix came to its senses earlier this week and announced that it would keep the "profiles" feature (and retain the customers who were threatening to jump ship) - and since Blockbuster failed to act on this opportunity, the window for them to regain some ground in the online market has closed ... at least until the next time Netflix takes aim at its own foot.

However, there's still some potential for profit, asn Blockbuster announced today that it has reconsidered its plan to buy electronics retailer Circuit City Stores, which many analysts saw as a marriage of two struggling firms that would produce little fruit, and the stock snapped back upward by five percent (Meanwhile, CC shares plummeted to a seven-year low).

I expect the stock will continue to recover as the news spreads, and I will probably cash out sooner than expected, with a smaller gain than I had hoped, unless they can build on this momentum by announcing alternative plans.