The day had finally arrived; Blockbuster has finally filed for Chapter 11 Bankruptcy. Chapter 11 means that the company will have the opportunity to reorganize and rid itself of cumbersome debt. In the filing, Blockbuster listed $1.02 billion in assets, and $1.46 billion in debt. The company expects to be able to reduce its total debt to a mere $125 million.
Blockbuster has been seeing steadily decreasing sales as digital services like Netflix have taken of in recent years. The Dallas-based company has about 3000 stores currently. They are expected to close as many as 1000 of them. After they complete reorganization, Blockbuster will attempt to focus more on digital content delivery. Considering the lateness of this push, they'll have a lot of catching up to do.
The future is unclear for the brick and mortar chain. They have been able to bundle video rental app with some phones as of late, and this could be a possible way to move forward. We'd also like to see a viable competitor to Netflix in the online streaming category. But the worry is that content would become increasingly siloed; exclusive to one company or the other. Do you think Blockbuster can find a place in the market?
In a move that should come as a surprise to absolutely no one, movie rental chain Blockbuster is telling Hollywood studios that it plans for file for bankruptcy next month, The LA Times reports.
Citing "people who have been briefed on the the matter," The LA Times says Blockbuster and its senior debt holders sat down with the six major movie studios last week to discuss "pre-planned" bankruptcy proceedings in mid-September. Blockbuster's goal is use its time in Chapter 11 to restructure mounting debt, which now sits at almost $1 billion.
Blockbuster has already closed almost 1,000 stores just in the last year, and as a result of its restructuring, more closures are coming, perhaps as many as 800, executives said. Once Blockbuster exits bankruptcy -- if it does -- the company sees itself growing through non-retail initiatives, such as expanding the number of Blockbuster-branded kiosks.
Blockbuster earlier this week announced that it would begin offering videogames as part of its DVD by mail subscription model, and there may be more at stake here than simply trying to gain some ground on Netflix.
According to news and rumor site Fudzilla, Blockbuster's financial situation is in shambles. It all started with the company being delisted by the New York Stock Exchange in early July, and since then, Blockbuster was able to get a forbearance agreement to delay a reported $42 million in interest payments, Fudzilla reports.
After all that, it seems Blockbuster will need even more extensions if it's to avoid filing for bankruptcy, though Creditors are reportedly pushing pretty hard for the rental chain to go through with a Chapter 7 filing.
The cold reality is that Blockbuster might simply be running out of both time and options. To date, the company has made a number of moves to try and adapt and remain competitive, including cheap kiosk rentals, introducing videogames to its DVD by mail business, and signing an agreement with Warner Brothers to receive movies a full four weeks before Netflix.
Blockbuster, seemingly down for the count in the DVD-by-mail game after suffering repeated blows from Netflix, isn't done fighting just yet. In an attempt to claw its way back into contention, Blockbuster is adding videogames to its monthly subscription programs, Dallas News reports.
Not only that, but the games are being thrown into the mix without any kind of pricing premium.
"We think it's a compelling value for households with kids," said Kevin Lewis, senior vice president for digital entertainment at Blockbuster.
Lewis might be selling the move a bit short. It's not just kids who play videogames, but regardless of your age, you'll soon have access to 3,163 game titles on Blockbuster.com, or 90 percent of the game titles released since 2000 for the Xbox, Xbox 360, PlayStation 2, PlayStation 3, and Wii consoles, Blockbuster claims.
This isn't completely new territory for the struggling video rental chain. According to Lewis, Blockbuster has been testing by-mail game rentals in Cleveland and Seattle since last year.
Everyone's favorite DVD rental kiosk, Redbox, is about to take a big step into the realm of high definition. The company will soon be rolling out Blu-ray discs to their locations, but it will cost customers a bit more pocket change. Regular DVDs have always gone for $1 per night, but Blu-rays will run you $1.50 per night.
At first, the selection will be limited, with titles like The Book of Eli, Green Zone, Bounty Hunter, and Brooklyn's Finest showing up in the first batch. The delay in moving to Blu-ray was tied to a legal dispute with the studios. Redbox has agreed to wait 28 days after a film's disc release before stocking it. This move brings Redbox to parity with Netflix, which has been offering Blu-rays by mail for some time.
At the rate Redbox and Netflix are taking over the market, we have to wonder how Blockbuster can expect to continue on. Are you a frequent user of Redbox? Does $1.50 for a Blu-ray sound like a reasonable price to you?
While Netflix continues to spread its presence on even more devices -- look for the streaming video service to shuttle onto the iPhone this summer -- one time rival Blockbuster is struggling just to stay in business. It's hard to call the two rivals anymore considering the sorry state the rental chain is in.
The latest victory for Blockbuster has nothing to do with one-upping Netflix or Redbox, but in winning a one-month reprieve on debt payments, Reuters reports. And even that comes with a caveat - the mega rental chain must begin delisting from the New York Stock Exchange.
After failing to make debt payments on July 1, Blockbuster said it struck a forbearance agreement with creditors holding some 70 percent of its 11.75 percent senior secured notes due 2014. Collectively, creditors are owed about $440 million, and they've agreed to hold off from exercising "remedies" until August 13.
"Six weeks is not a long time in a tough economy, where nobody has much credit," said Michael Pachter, analyst with Wedbush Securities. "There's nothing on the horizon that makes it look like Blockbuster is going to be more profitable."
As Netflix continues to steamroll the competition and plow into everyone's living room, Blockbuster could use a victory. Well, the struggling movie rental firm got one, and we're not talking about the moral variety, either. In a deal that has eluded both Netflix and Redbox, Warner Bros. has agreed to make new titles available immediately in Blockbuster's stores, mail, and on-demand.
"Warner Bros. and Blockbuster have enjoyed a cooperative and successful relationship for more than 25 years," Warner Home Video president Ron Sanders said in a statement. "The updated agreement will continue to provide Blockbuster customers with access to Warner Bros. titles the same day they are released."
That can't sit well with Netflix, who isn't allowed to ship new Warner Bros. flicks until 28 days after release. But it's great for Blockbuster, who last week warned for the second time in a year that filing for Chapter 11 bankruptcy protection is a possibility.
The new deal gives Blockbuster a four week advantage over Netflix, starting with The Blindside, which was released earlier this week.
Blockbuster will soon begin renting movies on SD cards. You will need to visit your nearest Blockbuster Express Digital kiosk to rent your favorite movies. There, users will be able to transfer DRM-protected movies to their own SD cards. According to a Fast Company report, the rentals will cost $1.99.
All said, hardware incompatibility may prove to be a major issue as not all phones, TV sets and notebooks feature a full-size SD cardslot. The kiosks will be built and managed by NCR Corporation, the very company that manages Blockbuster’s DVD-rental kiosks.
According to a filing with the Securities and Exchange Commission, Blockbuster plans to board up anywhere from 810 to 960 of its retail locations by the end of 2010. Blockbuster says the closures affect all unprofitable stores as it aims "to improve four-wall profitability."
Most of the closures will take place this year, with between 580 and 685 stores expected to be on the chopping block. The remaining unprofitable stores will shut down sometime next year, but there's still time to turn things around.
"All these stores are candidate stores," Blockbuster spokesperson Randy Hargove said in a phone conversation with Cnet. "Although we may in fact close that many stores, if we can renegotiate leases or remodel stores to make them more profitable, that number might go down."
Meanwhile, the company's kiosk business continues to grow and is set to explode this year. In a separate filing with the SEC, Blockbuster said it plans to have 2,500 units available by the end of 2009, up significantly from the 497 kiosk units now available. And by the end of the 2010, Blockbuster anticipates 10,000 kiosks scattered throughout the country in an attempt to "increase the points of distribution."
And maybe increase its stock price. Blockbuster shares are currently trading for $1.40, a far cry from the $45 Netflix shares change hands at.
In an attempt to better compete with streaming giant Netflix, Blockbuster this week announced a new deal to begin transmitting movies to TiVo users.
"This relationship with TiVo is step one in getting into the places that consumers care about," says Kevin Lewis, Blockbuster's senior VP for digital.
As part of the deal, Blockbuster will start selling TiVo DVRs in its retail stores later this year. However, neither company was willing to divulge how many of Blockbuster's nearly 4,000 stores will participate. Nor is it known what movies will be available, as "The studios and we are trying to figure it out," Lewis added.
Due to begin in the second half of 2009, Blockbuster's OnDemand will feature content to both buy and rent, and will be integrated into TiVo Series2, Series3, TiVo HD, and TiVo HD XL DVRs, Blockbusters says.
Barring any changes, TiVo owners with Blockbuster accounts will pay up to $4 to rent a movie and then have 30 days to begin watching. Subscribers will then be given a 24-hour window. Alternately, movies will be available for sale at up to $20 a pop, but DRM will prevent subscribers from copying purchased content over to DVD.