Tech & Biz

Blockbuster Video Prepares for September 'Pre-Planned' Bankruptcy

by Jordan Yerman | August 26, 2010 at 03:55 pm

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Blockbuster Video Prepares to File for Chapter 11 Bankruptcy Protection

Movie-rental giant Blockbuster is preparing to file for bankruptcy. CEO Jim Keyes met with Hollywood studio heads to inform them of the upcoming move, and Blockbuster hopes that its pre-planned bankruptcy period will only last five months. The plan is to use Chapter 11 to break leases on hundreds of poorly-performing retail locations and move to more kiosk- and online-based rental strategies.

Blockbuster has lost over $1 billion in the past two years, and mounting debt is preventing the company from growing. Meanwhile, web-based competitors like Netflix and the iTunes Store keep getting stronger.

Should Blockbuster Video successfully file for Chapter 11, the landlords of the soon-to-be-closed locations will be left short of what's owed them.
Acquired by Viacom for $8.4 billion in 1994, Blockbuster separated from the media giant ten years later and is now worth $24 million.

Blockbuster is hoping to use its time in Chapter 11 to restructure a crippling debt load of nearly $1 billion and escape leases on 500 or more of it 3,425 stores in the U.S. Maintaining the support of Hollywood's film studios during the process will be critical so that Blockbuster can continue to rely upon an uninterrupted supply of new DVDs.

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Nomo Blockbuster (not verified)

at 06:58 on August 27th, 2010

It may be in Blockbuster and society's best interest for the company to close shop for good. Let's face it: the company takes investments and blows the money on ideas that do not last and bear little to no fruit. It actually costs more to keep Blockbuster running than if the company were to liquidate. The company's creditors need to quit cutting Blockbuster so many breaks and start shutting ALL stores and wiping the company out. It's for the best, really.