Slow to move with the digital revolution, Blockbuster has filed for Chapter 11 bankruptcy. The move was widely expected as competitors like Netflix continue gaining momentum with streaming television and movie services.
On Thursday, Blockbuster announced an agreement with a group of bondholders that have about 80 percent of the company’s stock to recapitalize its balance sheet so it can remake its failing brick-and-mortar business model. If successful, Blockbuster’s recapitalization plan would substantially reduce the company’s debt from nearly $1 billion to about $100 million or less.
“It’s tough to say if Blockbuster can emerge from bankruptcy,” said Keith Nissen, principal analyst at In-Stat. “If they can get rid of the debt, a lot of options open up for Blockbuster. Their future may be getting acquired rather than trying to emulate Netflix or Redbox.”
Store Closings Likely
Jim Keyes, chairman and CEO of Blockbuster, said the bankruptcy filing is the best path to recapitalizing the company and positioning for the future. He used phrases such as “transform our business model” and “meet the evolving needs of our customers.” He also took the opportunity to reinforce Blockbuster’s strengths.
“The recapitalized Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels — stores, kiosks, by mail, and digital,” Keyes said.
Blockbuster’s operations will remain opening during the voluntary bankruptcy process, and the bankruptcy doesn’t include franchises or international stores. But there may be fewer Blockbuster brick-and-mortar facilities after the reorganization. The company said it’s evaluating its 3,000 U.S. stores with a “view toward enhancing overall profitability.”
Acquisition Target?
It’s not clear how Blockbuster aims to compete with Netflix, Apple’s iTunes Store, Redbox, Hulu and the growing number of digital…