Circuit City - What Went Wrong?

Four letters. D-I-V-X. For some crazy reason, back in 1997, Circuit City dreamt up the idea of becoming a hardware vendor and developed a pay-per-view scheme for watching movies on your DVD player. Officially launched in 1998, the Divx enhanced DVD players attempted to grab an additional $50-$100 over standard DVD players. Movies were as low as $4.49 for a 48-hour viewing period, after which the consumer had to reactivate their viewing period for additional hours. I will spare you the details, but needless to say it FALIED! Miserably. It wound up costing Circuit City over $100M and a major distraction that they never bounced back from.

Now, I never really liked Circuit City. The road to Richmond is littered with wasted co-op dollars and Waffle Houses. Their stores were a relatively boring place to shop at. Although they moved volume, at times, they took their eye off of the ball and allowed Best Buy to completely out execute them. They never took the Avis approach of 'let's try harder'. Instead, they played hardball with vendors and did the most sterile marketing and promotion one could imagine.

So now what? Will the Mexican tycoon Ricardo Salinas Pilego, who grabbed 47M shares at a deep discount, save this ailing retailer and bring them back out of Chapter 11? Hopefully, he’ll do better than Carlos Slim did with his CompUSA purchase. Or, will someone like Frys grab some key locations and expand their market share. We will have to wait and see. In the meantime, the celebration in Minneapolis continues as Best Buy reaffirms their position of power.

Thoughts? Comments? Concerns?