Blockbuster, Circuit City Merger Could Produce 'Exclusive' Content

In his public letter to the CEO of Circuit City requesting that negotiations commence on a merger deal, Blockbuster CEO Jim Keyes suggested that the combined retailers would not only be able to secure exclusivity deals for content -- as Blockbuster has already been known to do for its 7,800+ rental outlets in the US -- but might also have the ability to market and sell an undefined, exclusive content delivery device.

"The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices," wrote Blockbuster's Keyes this morning. "We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices. Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance."

Blockbuster announced earlier today a hostile takeover bid of between $6 and $8 per share or just over $1 billion for Circuit City Stores Inc.. Circuit City's response has only been to question Blockbuster’s ability to finance the deal.

Circuit City said it has exchanged information with Blockbuster, but advised its shareholders to take no action until the board examines the bid. Blockbuster hopes to enlist Circuit City shareholder support for its bid by disclosing previously private communications with Circuit City's executives.

At the end of trading today Circuit City shares climbed 27 percent closing at $4.97, while shares of Blockbuster plunged to an all-time low eventually closing down 10.2 percent, to close at $2.81.