In news that should surprise no one that has been following the mega-movie rental chain, the Wall Street Journal is reporting that Blockbuster has finally lost the battle against its $900 million of debt, and will be filing for Chapter 11 bankruptcy to protect itself from creditors. The video rental store will file a “pre-packaged” bankruptcy plan, which will allow the chain to stay in business and return within a few months after restructuring.
Blockbuster has been doing everything possible in order to avoid bankruptcy, but the signs have been pointing towards this for months. A few weeks ago, executives from Blockbuster quietly began to admit defeat by meeting with Hollywood executives to discuss the company’s new business model following the upcoming restructuring.
The news of Blockbuster preparing for bankruptcy kicked off a quiet struggle to determine who would control the fate of the re-structured company. Last week that battle ended when corporate raider Carl Ichan managed to purchase one-third of Blockbuster’s debt, guaranteeing that he will be the driving force behind the restructuring, or at least be in a position to block any plans that he disapproves of.
Once the bankruptcy is official, Blockbuster will then begin to close between 800 and 1000 stores out of the 3,400 stores that were not among the 1,000 that have already closed in the past year. Once the bankruptcy ends, which could be between 3 months and a year, Blockbuster intends to return with a bigger emphasis on digital distribution, as well as building their kiosk rentals.
Blockbuster joins fellow movie rental chain Movie Gallery, who filed for bankruptcy and closed all the Hollywood video stores earlier this year.