When Dinosaurs Mate

In the coldhearted world of American capitalism, does the merger of two losers add up to a winner, or merely to a bigger loser? Kmart and Sears investors seem willing to believe their union makes sense, but we’re skeptical, unless, of course, they are simply counting the cash-out value of the stores’ real estate.

Kmart and Sears are venerable American brands, but their stores and merchandising have long been monuments to the proposition that success in business can be fleeting -- monuments akin to those imposing Pan Am 747s that once ruled the air.

As a response to a landscape now dominated by a more efficient Wal-Mart, a bulked-up Home Depot and a trendier Target, the Kmart-Sears merger, orchestrated by financier Edward Lampert, has a too-little, too-late feel to it.

But on the topic of mating dinosaurs -- anachronistic businesses announcing mergers -- it’s hard to top the curious move by Blockbuster to acquire the Hollywood Video chain. It’s unclear what Blockbuster would get should its $1-billion bid succeed, other than a larger slice of a shrinking pie. The combined chains clearly would dominate the universe of bricks-and-mortar movie rental business, but that may be a dubious distinction.

Blockbuster itself once was so convinced that its stores were antiquated that it made deals with Enron in the hopes of using that fast-talking company’s distribution pipes. Now SBC and Yahoo, trying to match satellite companies and cable operators, have their own video-on-demand scheme. Netflix subscribers order DVDs online and let the U.S. Postal Service handle pickup and return. And at the low-tech end of the spectrum, Wal-Mart’s low prices are persuading consumers to buy rather than rent or order online.

But Blockbuster still thinks there is value in all those stores where couples can be seen bickering over which movies to rent -- if any good titles are still on the shelves. Blockbuster, which earlier this year was spun off by Viacom for fear that the writing was on the wall, has been losing money of late, but somehow seems to believe that more of the same is the answer to its woes.

Five years ago, the Federal Trade Commission voiced serious antitrust concerns when it rejected an earlier Blockbuster bid for Hollywood Video, the nation’s second-largest movie rental chain. That was about as wrongheaded as Washington’s rejection of the proposed merger between United Airlines and US Airways, and we hope regulators will be more accommodating this time around. A proper application of antitrust law in this case requires a more updated definition of the market. Blockbuster could own all the video stores nationwide and it would hardly be a monopoly, given the variety of other ways of acquiring movies and video games.

Put differently, the federal government should not stand in the way of dinosaurs coming together.