M+E Daily

by Marty Porter

Hollywood could have done a lot more to help keep Brian Dunn his job.

You don’t need to be reading this newsletter to find out that the Best Buy CEO was shown the door earlier today amidst lousy financial reports and following a blitzkrieg attack by Wall St. analysts.  Growing online sales (aka digital media) was not enough to make up for a decline in TV and laptop sales (aka physical media).  Meanwhile, Apple is devouring the entire consumer electronics category with their own products and their own stores — even though the blue shirts at Best Buy sell about 13% of their iPhones in North America.

It’s ironic too that the hottest CE category (connected devices) are the very products that are breeding the perceived demise of a big box house living in a commoditized, virtual world of mobile devices, apps and downloadable entertainment.

Probably Dunn was too much of an old-school retail guy anyway — having worked his way up from the store level over 28 years.  If Best Buy is going to survive they’re going to need go Apple-style in their stores while they buy time building a digital strategy that the analysts will buy into — while we all, as a collective industry, figure out what we’re going to do when (not if) what’s happening to Big Blue happens to our  own Big Blu.

Dunn’s ultimate ouster started with an article on Forbes.com entitled “Why Best Buy is Going out of Business…Gradually” .

This was matched by an equally vicious attack published on AOL Finance entitled “9 CEOs who Need to Get Fired”  Read it here.

Wedbush Securities analyst Michael Pachter explained it best in a late last month when he was quoted as saying: “With the Internet and smartphones, we don’t need to shop at Best Buy to figure out which TV or electronics we want. Their solution may be good for 2011 but will be irrelevant by 2014. Technology is going to pass them by like they’re standing still.”

Pachter should have thrown in a few A-words (Apple and Amazon) while he was at it because there’s where all the money’s going — those are the retailers that are successfully fighting the lowest prices at Costco and Wal-mart with an elegant shopping experience combined with anywhere, anytime entertainment.

But remember — as a collective industry — we had a silent pact with all our retail partners; they’ll sell our discs as long as those discs are driving people into their stores.  The fact that Dunn failed at his job doesn’t exactly make us look very good at holding up our half of the bargain.

was the first to spot the role of entertainment in Best Buy’s decline when it reported in a recent posting the fact that its  entertainment category (games, DVD, Blu-ray) had dropped from 14% last Q4 to an ugly 20% decline this Q4.

So what do we do?  A healthy physical retail presence for home entertainment is in everyone’s best interest.  A mission of supply chain experts (digital and physical) need to start camping out in Richfield, Minnesota helping shore up their distribution backbone, while the marketing types need to spend some all-nighters creating a host of event-driven special Hollywood-style events for new releases.  Meanwhile, the digital dudes have to accelerate their roadmap for the future — they need to quickly help Best Buy and all our industry’s retail partners build out their digital entertainment infrastructures so they can drive traffic to their new storefronts on the web.

In a world of where a none-company named Instagram gets $1 billion from Facebook — valuation is all about digital strategy.  With Apple’s retail genius Ron Johnson off the short-list of potential execs as he recreates JC Penney, Best Buy is left nothing else by a digital play.  Don’t be surprised when their new CEO comes knocking on home entertainment doors in Hollywood someday soon asking to know how we’re going to help him build web traffic moving forward — and when that day comes, we better have a really good answer — for our customer and for ourselves.