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Why it's time for Blockbuster to give up

Now that Netflix has inked a deal with Microsoft, Don Reisinger thinks Blockbuster is out of options. But does Blockbuster have something up its sleeve?

Netflix has always been a thorn in Blockbuster's side. For years now, the company has found creative ways to shape new business models and generally make Blockbuster look old, ragged, and incredibly foolish.

And although it was facing serious financial issues that required it to close hundreds of stores and layoff thousands of employees, Blockbuster has turned things around as of late. In the last two quarters, it enjoyed a slight profit of about $40 million in each period.

With that in mind, I was under the impression that things were finally turning the corner and it would have the ability to realize that the future of its business isn't in the brick-and-mortar, but in the wide world of downloads. And although its stock price is laughable and its foolhardy decision to go after Circuit City made it look desperate, I thought Blockbuster would finally wake up and get to work on something worthwhile.

Evidently, I was wrong.

Instead, it's (once again) Netflix realizing that the future of the the rental business isn't in the brick-and-mortar and probably not even in the mail sector. It's Netflix that's adapting to the changing times by streaming movies and TV shows to its Roku box and, now, the Xbox 360.

And in one fell swoop, Netflix has once again made Blockbuster irrelevant.

What other recourse does Blockbuster have now other than to keep plugging away with its brick-and-mortar business and hope to stay afloat long enough to sell it off to the highest bidder? It's not only the loser in the rental business, but now that it's slow to the streaming game, how can it capitalize on the market?

Whether it wants to believe it, the future of the rental business is in streaming, and once broadband speeds increase, HD downloads. Netflix realized that quickly and with the help of Microsoft and Roku, it's now the leader in that space. But what can be said for Blockbuster?

So far, Blockbuster has stayed true to its core business and aside from its acquisition of MovieLink, has done little to improve its prospects of beating, nay, competing with Netflix. So what exactly has this company been doing while Netflix has been analyzing the industry and finding ways to expand its presence and future-proof itself?

My guess: worrying about the company's financial standing, hoping against hope that Netflix would implode, and spending far too much time on Circuit City.

Blockbuster's ineptitude over the past few years is simply unrivaled. After presiding over a financial crisis and allowing an unknown company to become the leader in the rental business, it once again missed an opportunity to lead a sector and saw that same pesky company take control. All the while, the company's shareholders will suffer.

Because of that, I simply don't believe Blockbuster executives have any other recourse, but to sell the company to the highest bidder and get out from under the albatross before it's too late. Suffice it to say, that this team of executives has been made to look foolish by Netflix and unless it comes to that realization, it'll continue to make the wrong moves and see all parties suffer.

As the second-place company in a dying industry, Blockbuster should have been the leader in a new industry. Instead, it has let Netflix slide into that role and leave Blockbuster behind to pick up the scraps and hope against hope that Netflix will make a mistake. Sure, some will say that Blockbuster is banking on MovieLink, and that may be true. But the fact of the matter is that MovieLink isn't doing anything for Blockbuster and by allowing Netflix to beat it again, it has been cornered out of the one place it could save the company from an almost guaranteed financial crisis.

Once again, Blockbuster executives have shown that they just don't have what it takes to stand up to Netflix and the latter has shown that it has the requisite knowledge needed to take Blockbuster out.

It's time to sell Blockbuster to the highest bidder. If that doesn't happen, look for this company to continue its trek deep into the realm of irrelevance.

Want to know what Don is up to? Follow him on Twitter and FriendFeed.