End of the line for Blockbuster?
Under attack from nimbler rivals such as Netflix and Redbox, Blockbuster has hinted it could soon file for Chapter 11 bankruptcy protection.
Could the age of video stores come to a screeching, shuddering halt? After years of losing customers to Netflix, DVD vending machines, and video streaming services such as Hulu, the rental chain Blockbuster yesterday indicated that it could soon push for Chapter 11 bankruptcy protection. In a filing with US regulators, Blockbuster reps pointed to "significant liquidity restraints" and a pile of steadily-mounting debt.
"The increasingly competitive industry conditions under which we operate has negatively impacted our results of operations and cash flows and may continue to in the future," Blockbuster reps wrote, according to the Associated Press. "These factors raise substantial doubt about our ability to continue as a going concern." According to the Guardian, Blockbuster lost $569 million last year, and is currently struggling to deal with more than $975 million in debt.
Shares of Blockbuster Inc. fell to 28 cents on Wednesday afternoon, even as Blockbuster pledged to do more to haul its business into the 21st century. The Associated Press reports that Blockbuster opened 2,000 DVD rental kiosks in 2009. Some 10,000 more will apparently be opened by midway through 2010. Meanwhile, Blockbuster has pushed its own DVD-by-mail service, which costs between $8.99 and $16.99 for a monthly subscription.
Blockbuster has a steep slope to climb before the company is on equal footing with Netflix. As we reported earlier this year, Netflix counts some 12 million Americans among its US subscriber base, and Netflix exec Reed Hastings has said that video-streaming services will go global this year. Blockbuster also faces pressure from newer entries into the video-streaming field.
HBO, for instance, recently launched HBO GO, which features more than 600 hours of "continuously updated" programming. But the biggest problem facing Blockbuster may be cultural: the bulk of Blockbuster's business is in rental outlets, and most Americans have come to prefer point-and-click shopping to the clamor of the video store.