The Five Dumbest Things on Wall Street This Week

5. Fool Throttle

Even Blockbuster (BBI) managed to scrape up some good news this week.

The Dallas-based movie-rental chain has seen its shares plunge 64% off last spring's high. Deep-pocketed competition and a glut of cheap DVDs have combined to crush demand. The company lost $600 million over the first three quarters of 2005 -- full-year results aren't due for another week yet -- and Blockbuster last month announced another round of layoffs.

Even mighty Carl Icahn has gotten scorched by his foray into videoland. Icahn bought into the chain early last year, making his customary claims of management incompetence and burdensome red tape, only to see the stock head straight down soon afterward.

With Blockbuster flailing and mail-order DVD rival Netflix (NFLX) surging, you'd think Blockbuster would be circumspect. But you'd be wrong. The company went on the offensive after a recent Associated Press story rehashing Netflix's practice of "throttling," or limiting the number of DVDs ordered by certain heavy-use customers.

"Blockbuster Online does not throttle. When we say our service offers unlimited rentals, we mean it," said Shane Evangelist, senior vice president and general manager for Blockbuster Online. "We don't prioritize our customers' movie fulfillment based on how often they use our service, and we don't limit the number of movies a subscriber receives each month. We want our customers to get the full entertainment value that comes from a subscription plan, whether that's watching 20-plus movies a month or five."

As nice as that sounds, you still can't blame shareholders for wanting to throttle someone.

Dumb-o-Meter score: 75. The only entertainment value investors have been getting from Blockbuster falls into the "how low can you go" department.

>To order reprints of this article, click here: Reprints