Blockbuster Files Bankruptcy, Hopes to Reorganize

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The well known video rental chain Blockbuster announced on Thursday that it has filed for Chapter 11 Bankruptcy protection. The company hopes to use the filing to trim down its ballooning debt as it works to compete with the likes of Netflix, Redbox, Amazon and Apple’s iTunes Store.

“Blockbuster is taking action to recapitalize our balance sheet and reduce our debt substantially,” the company said in a statement. “Our recapitalization is intended to put Blockbuster in a stronger financial position so we are better able to invest in new technologies and initiatives to meet our customers’ evolving preferences.”

Blockbuster gained popularity in the 1980s and 1990s thanks to its video rental stores customers could visit and browse for movies. That business model began to falter, however, when companies like Netflix began offering movie rentals by mail.

When Netflix, along with companies such as Apple and Amazon, began offering access to movies and TV shows online, Blockbuster’s headaches continued to grow despite its own move into rental by mail.

Blockbuster is hoping it can use the bankruptcy to cut its debt from over a billion dollars down to about US$100 million.

The company said it plans to keep its rental stores, kiosks, mail and online services open, and that it plans to continue adding new movies to its inventory.

Comments

Nemo

Reorganizing into Netflix is the only option, but if Blockbuster’s management was capable of doing that, they would have done it by now.

xmattingly

You could say that the Blockbuster business model is to video rental what AOL is to online services. But, regardless of what problems they faced, it’s their own damn fault.

Personally, I spent enough years getting jerked around by their flighty rental policies and bad service to just avoid them and stick with more reliable rental outlets.

iphonzie

The company said it plans to keep its rental stores, kiosks, mail and online services open, and that it plans to continue adding new movies to its inventory.

So, they are just going to keep beating their heads against the wall, without actually changing their business model? What a plan?

Perhaps this is why BLOKB stock is currently selling for $0.024 per share.

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