Blockbuster files for bankruptcy

September 23, 2010 by Charlotte Raab
A Blockbuster store in Los Angeles seen in August 2010. The ailing US video rental company said on Thursday that it has filed for bankruptcy protection while it tries to restructure its business to focus on digital distribution.

US video rental giant Blockbuster declared bankruptcy Thursday, falling victim to digital delivery of movies by Netflix and kiosk outlets such as Redbox.

Blockbuster's filing for means hundreds of its brick-and-mortar stores are likely to close as the Texas-based company makes a belated attempt to focus on digital distribution.

said it had reached agreement with a group of creditors on a plan to bolster its financial position as it tries to turn around the business.

The plan would reduce the company's debt from its current level of nearly one billion dollars to about 100 million dollars.

Jim Keyes, Blockbuster's chairman and chief executive, said the move will allow Blockbuster to "continue to transform our business model to meet the evolving preferences of our customers."

He said Blockbuster enjoys "a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels -- stores, kiosks, by-mail and digital."

Blockbuster, which has some 3,000 US stores, had already unveiled plans to close 1,000 outlets. With the reorganization, between 500 and 800 additional stores are expected to close, according to The Wall Street Journal.

Blockbuster said its non-US operations and its domestic and international franchisees, all of which are legally separate entities, are not included in the bankruptcy proceedings.

During the reorganization, all of its US stores, DVD vending kiosks and other operations will be open for business as usual, Blockbuster said.

Netflix shares rose 3.45 percent to 162.35 dollars in early trading in Wall Street on Thursday after gaining more than six percent on Wednesday on reports that the by Blockbuster was imminent.

Blockbuster shares have been delisted and are nearly worthless.

Netflix, which streams movies to subscribers over the Internet or delivers DVDs by mail, has flourished -- expanding to Canada on Wednesday, its first venture outside the United States -- as Blockbuster has struggled.

Netflix, which claims more than 15 million members, introduced a service in Canada that allows subscribers to watch unlimited movies and TV episodes streamed from Netflix to TVs and computers for 7.99 dollars a month.

Blockbuster at one time operated as many as 7,200 stores in the Americas, Europe, Asia and Australia but has been forced to close hundreds as consumers moved to other options such as digital video-on-demand.

Analyst Michael Pachter of Wedbush Securities said Blockbuster was slow to adapt to changing customer tastes.

"Blockbuster waited too long to take seriously," he said. "And then when they decided to compete in 2004 they didn't do a very good job."

Pachter did not write Blockbuster off entirely, however.

"There will always be people who like to shop in stores," he said, although that is "a shrinking number of people."

Pachter said Redbox, which rents videos from vending kiosks, offers a limited selection and "with Blockbuster you have 10,000 movies per store to choose from."

"The question is whether there'll be enough traffic to support brick and mortar," he said.

Explore further: Netflix shares soar on Blockbuster bankruptcy reports

Related Stories

Blockbuster to stream video rentals on Samsung TVs

July 14, 2009

(AP) -- Having been a step behind in the race to pipe entertainment from the Internet to television screens, struggling video rental-chain Blockbuster Inc. is counting on a new partnership with Samsung Electronics America ...

Blockbuster to offer movies on Motorola phones

August 18, 2009

(AP) -- Blockbuster Inc. plans to offer movies that can be watched on Motorola Inc. cell phones. It marks the struggling rental company's first step into mobile video and is its latest effort at chasing down the customers ...

Netflix links online DVD service to Facebook

March 25, 2009

Netflix has linked to Facebook, and Blockbuster is making films available on-demand to users of TiVo digital recorder devices as the US DVD rental giants continue an Internet-age duel.

Recommended for you

Cryptocurrency rivals snap at Bitcoin's heels

January 14, 2018

Bitcoin may be the most famous cryptocurrency but, despite a dizzying rise, it's not the most lucrative one and far from alone in a universe that counts 1,400 rivals, and counting.

Top takeaways from Consumers Electronics Show

January 13, 2018

The 2018 Consumer Electronics Show, which concluded Friday in Las Vegas, drew some 4,000 exhibitors from dozens of countries and more than 170,000 attendees, showcased some of the latest from the technology world.

Finnish firm detects new Intel security flaw

January 12, 2018

A new security flaw has been found in Intel hardware which could enable hackers to access corporate laptops remotely, Finnish cybersecurity specialist F-Secure said on Friday.


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.