Blockbuster Preparing for Bankruptcy?

August 27, 2010 By Geoff Duncan

Unconfirmed reports have video rental chain Blockbuster getting ready to file for bankruptcy...and close hundreds of stores.

Former video rental giant Blockbuster may be getting close to filing for bankruptcy as a way to escape a mammoth debt burden of over $1 billion. According to reports in the Los Angeles Times and elsewhere, Blockbuster representatives have been meeting with major movie studios to outline their plans for a bankruptcy filing that would see the company shuttering as many as 500 of its nearly 3,500 retail locations. If Blockbuster wants to keep its core rental business going during the bankruptcy, it needs to make sure its relationships with major studios are smooth so the company can continue to offer new movies and releases as they become available on DVD.

By planning the timing of a bankruptcy filing—and getting its major debtors and business partners on board with the plan before the filing—Blockbuster may hope to minimize disruption to its business operations and revenue streams.

Blockbuster has lost more than $1 billion since 2008, and has racked up over $900 million in debt. A good portion of the company’s revenue is going towards servicing that debt; a Chapter 11 bankruptcy restructuring would enable the company to escape a substantial portion of that debt burden in exchange for creditors taking over sizable portions of the company.

Earlier this month, Blockbuster cancelled its second quarter financial conference call and announced it had reached a forebearance agreement with its debt holders as the company moved to work out a recapitalization plan.

Showing 4 comments

Lothlorian at 12:27pm 2nd September 2010 Blockbuster's pricing and late fees turned me off many many years ago. Netflix as just about every movie I ever would want to watch via DVD rental by mail. All with NO late fees. Netflix also thought about the future being one of the first decent streaming services for instant gratification. Blockbusters depended way to much on late fee revenue to give it up easily. We have no late fee's we call the restocking fees.... LOLZ. Good riddance to overpriced rentals and new dvd's that are 5 to 10 USD higher than the same movie at Wall-mart or Target.
Mark Burns at 6:27am 28th August 2010 I belong to Netflix but still shop at Blockbuster once a week. Love looking for that movie that I wouldn't find online. Rent all of my blu-ray movies from BB. Netflix is great for classic and foreign titles that are less apealing to the masses. I do miss those mom & pop stores and finding the odd memorable, often very low brow, film. I don't understand those who like streaming. They need a lesson in spotting artifacts.
Lee Maxwell at 11:47am 27th August 2010 Luv how there's an ad for Nteflix on this page, LoL. Ironic much?
ioman at 11:27am 27th August 2010 Anyone surprised? What's sad is that there are basically no movie rental places you can go anymore. Everything is done through the mail.