Blockbuster on the Way to Bankruptcy?
Top Video Retailer Ready to Restructure Debt in Order to Survive
Mar 9, 2009
Once Blockbuster dominated the U.S. video market but has steadily lost revenue after years of dominating the video retail market. It is now in the process of trying to restructure its debt and find ways to raise raise capital. It is reported that Blockbuster is anticipating bankruptcy but this has has been denied by the company.
Bockbuster History
At one time Blockbuster operated about 6,500 video stores, serving more than 87 million customers in the United States, its territories, and 25 other nations. Founded in the mid-1980s as an alternative to small, local operations with limited video rental selection, the company grew quickly into a nationwide chain, with other interests in the entertainment industry as well, including music retailing.
In 1994, Blockbuster became a wholly owned subsidiary of Viacom Inc. Viacom retained total control of Blockbuster until its 1999 initial public offering of 31 million shares (about 18 percent) of Blockbuster's stock. In the late 1990s, Blockbuster faced challenges brought about by new ownership, increased competition, and a relatively soft market for videos. Nevertheless, the company had coped by refocusing its efforts on its core video rental business. In 1999, Blockbuster boasted a store within a ten-minute drive of virtually every major neighborhood in the United States.
Blockbuster set out on a program of aggressive expansion. The company began to buy back franchised operations with the goal of 60 percent company-owned Blockbuster outlets. In addition, Wayne Huizenga began to buy up chains of video stores that already dominated their local markets, using this as a shortcut to quick expansion.
Netflex to Replace Blockbuster
Netflex looks increasingly well-positioned to replace Blockbuster with its tried-and-true method of giving the public something of value at a price that it can (still) afford. Shares of the online video-rental firm were up $1, or 2.8%, to $37.17 on March 5, 2009, after the company trumpeted that is has topped the 10 million-subscriber mark. It has done so by adding 600,000 net subscribers (taking into account those that have left the service), since the beginning of 2009.
Blockbuster Today
It has been estimated that Blockbuster may owe as much $900 million in accounts payable due to studios, vendors and suppliers. Meanwhile, Hollywood has long explored other options, anticipating such problems. For example, Disney told reporters that the media giant was thinking about its own online video rental subscription business.
Both Netflix, itunes and other video sites are seen as the dominant channels for movie distribution. digital downloads and on-demand video that would be sent directly to customers' homes.
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