Blockbuster Stores to Go the Way of the Dodo Bird, Bankruptcy Expected
August 27, 2010
(ChattahBox)—The Dallas-based video movie chain Blockbuster Inc., is continuing with its shuttering of retail stores, as the slumping company scrambles to survive in a changing market. Customers are moving away from retail store rentals to the convenience of Redbox in-store kiosks, Online Netflix rentals and digital downloads. Now, the company is reportedly filing a “pre-planned” Chapter 11 bankruptcy, as early as next month, to restructure the company’s debt and dispense with its costly retail leases. Up to 800 additional Blockbuster retail locations are expected to close.
According to a report by the LA Times, Blockbuster officials have been quietly meeting with Hollywood movie companies to get them on board before the bankruptcy filing. Blockbuster wants to ensure it would continue to have ready access to movies, as the company goes through a restructuring process.
“Though its plans are not yet set in stone, people knowledgeable about the discussions said the Blockbuster representatives presented a mid-September bankruptcy as the most likely scenario. It would enter what is known as a “pre-planned bankruptcy,” meaning most but not all creditors would be on board ahead of time, including senior debt holders and content suppliers.”
After the chain already closed nearly 1,000 stores this past year, with another 500-800 on the chopping block for the near future, it’s clear the brick and mortar retail market will soon go the way of the Dodo Bird.
“If it successfully exits bankruptcy, Blockbuster has told Hollywood studios, it hopes to grow through non-retail initiatives. Kiosk manufacturer NCR Corp., for instance, has already deployed about 6,000 Blockbuster-branded kiosks that, like Redbox, rent DVDs for $1 per night.”
And the beleaguered video rental chain also intends to expand its digital download business.
A Blockbuster spokesperson declined to confirm the bankruptcy talks, but a news release published on its website on Aug. 13, said “Our discussions continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future.”
With news of Blockbuster’s expected bankruptcy, shares of Netflix climbed today. Blockbuster’s stock now sells over-the-counter for pennies.
Photo Source: Wikimedia Commons/Bidgee/Blockbuster