Blockbuster, 1 billion in debt, filing for bankruptcy

moshquerade

No Lifer
Nov 1, 2001
61,504
12
56
It was a good run... but like all good runs, it came to an end.

Blockbuster tells Hollywood studios it's preparing for mid-September bankruptcy


August 26, 2010 | 3:56 pm

After dominating the home video rental business for more than a decade and struggling to survive in recent years against upstarts Netflix and Redbox, Blockbuster Inc. is preparing to file for bankruptcy next month, according to people who have been briefed on the matter.

Executives from Blockbuster and its senior debt holders last week held meetings with the six major movie studios to discuss their intention to enter a “pre-planned” bankruptcy in mid-September, said several people familiar with the situation who requested anonymity due to the sensitivity of ongoing talks.

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.

Blockbuster has lost a total of $1.1 billion since the beginning of 2008 and has been severely hamstrung in efforts to grow its business due to interest payments on $920 million in debt. Earlier this month the company announced that most of its debt holders had agreed to a forbearance on interest payments until Sept. 30, during which time it would attempt a recapitalization.

Last week Dallas-based Blockbuster's chief executive, Jim Keyes, came to Los Angeles to hold individual meetings with executives at studios including 20th Century Fox, Paramount Pictures, Sony Pictures, Universal Pictures, Walt Disney Studios and Warner Bros. He was joined by a team of restructuring consultants hired to help turn around the struggling company, along with its senior debt holders who would likely end up owning a substantial portion of Blockbuster following bankruptcy.

Former Sony Pictures home entertainment president Ben Feingold, who is serving as an advisor to the debt holders, was present as well.

Though its plans are not yet set in stone, people knowledgeable about the discussions said the Blockbuster representatives presented a mid-September bankruptcy as the most likely scenario. It would enter what is known as a “pre-planned bankruptcy,” meaning most but not all creditors would be on board ahead of time, including senior debt holders and content suppliers.
One of the primary goals of the bankruptcy process, which the company said it hopes would last about five months, would be to escape costly leases for some of its worst-performing stores. Though Blockbuster hasn’t decided exactly how many locations it would seek to shutter as part of a bankruptcy, executives told the major studios it is looking at between 500 and 800.

Blockbuster closed nearly 1,000 stores in the last year alone, a reflection of consumers’ rapidly declining interest in renting DVDs from retail locations now that they can rent them from ubiquitous kiosks in grocery stores, in the mail, or via the Internet.

If it successfully exits bankruptcy, Blockbuster has told Hollywood studios, it hopes to grow through non-retail initiatives. Kiosk manufacturer NCR Corp., for instance, has already deployed about 6,000 Blockbuster-branded kiosks that, like Redbox, rent DVDs for $1 per night.

The company also hopes to expand its presence in the still nascent digital distribution space, through which a growing number of customers are downloading or streaming movies on computers, Internet-connected televisions, and mobile phones.

Most studios are believed to be supportive of Blockbuster’s efforts, as they want to see it remain in business as a viable competitor to Netflix and Redbox, particularly since the formerly second-largest DVD rental store, Hollywood Video parent firm Movie Gallery Inc., went out of business in April.

But there are still some issues to be resolved, including the company’s desire to continue offering movies from all the studios on the same day they go on sale. Fox, Universal and Warner have all instituted a 28-day window on rentals through Redbox and Netflix.

The studios would likely be protected from any significant losses on payments Blockbuster might owe them at the time it files for bankruptcy under the proposed plan. But they would lose revenue from any stores shut down.

The parties most impacted would be Blockbuster’s junior debt holders and the landlords of leases that would be canceled under the proposed bankruptcy. It remains to be seen whether they would attempt to challenge a plan that left them with a fraction of what they are owed.
If the company does not enter bankruptcy, it would need to find a new investor or convince its debt owners to significantly reduce its interest payments for the foreseeable future.

A Blockbuster spokeswoman declined to comment on the studio meetings. In a statement, she said, “The extension of our forbearance agreement is a strong sign of support from our senior secured noteholders as we work toward putting in place a more appropriate capital structure to support Blockbuster’s long-term growth. … Our discussions continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future.”

Blockbuster stock, which last month was delisted by the New York Stock Exchange because of its ongoing low price and moved to the over-the-counter market, closed Thursday at 11 cents. The company’s total market value is $24 million.

In 1994 it was acquired by former owner Viacom Inc. for $8.4 billion.

http://latimesblogs.latimes.com/ent...ts-preparing-for-midseptember-bankruptcy.html
 

IronWing

No Lifer
Jul 20, 2001
71,367
30,961
136
I feel bad for the employees but...

I only rented from Blockbuster maybe twice in my life. They always had 500 copies of the latest hit but not much else. The local rental place has thousands of titles.
 

xanis

Lifer
Sep 11, 2005
17,571
8
0
Yep, totally saw this coming. Their biggest downfall was not getting in to the rental-by-mail and online streaming markets years ago. They did eventually start offering them, but it was too little too late IMO.
 

Wyndru

Diamond Member
Apr 9, 2009
7,318
4
76
Looks like this one is for real, there have been claims that BB would file for a few years now.
 

QueBert

Lifer
Jan 6, 2002
22,766
993
126
Will suck to see them go, I will never wait for movies to be shipped from Netflix. And while I really like Redbox their selection sucks unless you like new movies. The .98 cent a day place up the street closed down a few months ago. Running out of options locally :(
 

zerocool84

Lifer
Nov 11, 2004
36,041
472
126
Yep, totally saw this coming. Their biggest downfall was not getting in to the rental-by-mail and online streaming markets years ago. They did eventually start offering them, but it was too little too late IMO.

IMO they should have closed down all the stores and gone just mail and streaming or the kiosks like RedBox.
 

JackBurton

Lifer
Jul 18, 2000
15,993
14
81
Will suck to see them go, I will never wait for movies to be shipped from Netflix. And while I really like Redbox their selection sucks unless you like new movies. The .98 cent a day place up the street closed down a few months ago. Running out of options locally :(

Best Buy is always an option. :)
 

Wyndru

Diamond Member
Apr 9, 2009
7,318
4
76

0roo0roo

No Lifer
Sep 21, 2002
64,795
84
91
they pissed away their good will with me a long time ago. jumped to netflix and never looked back. blockbusters long been run by folks who didn't really care about movies and it showed, never mind the blatently shady sh*t
 

OverVolt

Lifer
Aug 31, 2002
14,278
89
91
I rented gladiator for a school thing, and was too busy to return it for like 2 weeks. They sent me a collections notice. Redbox would have just charged me I think. This is why no one likes blockbuster.

Blockbuster express > redbox though.
 

Train

Lifer
Jun 22, 2000
13,579
75
91
www.bing.com
I dont see DVD by mail lasting long either. Services like Netflix are just a stop gap between renting from a local store and full on HD streaming.

At least Netflix realizes this and is setting themselves up for more and more streaming.

Eventually we should see full service streaming services, one stop shop for movies, TV shows (new and old), News, and even live sporting events. I imagine it would have datacenters around the world to optimize bandwidth, and may even use P2P style downloading. Once this happens we can say goodbye to Cable/Satelite and just use a high badwidth internet connection for everything.
 

OrByte

Diamond Member
Jul 21, 2000
9,303
144
106
when Blockbuster first came around they ran my mom and dad out of business.

no tears shed over here! :p
 

arrfep

Platinum Member
Sep 7, 2006
2,314
16
81
when Blockbuster first came around they ran my mom and dad out of business.

no tears shed over here! :p

Yeah. Karma's a bitch. About 8 years back I was talking to an exec who was visiting our small-town college for a career fair. He said they were looking to open a location in the town, which was 16k people including the 8k college students. We already had 2 local/regional shops, both of which had killer prices. I asked them how they expected to compete against shops with lower prices and and established, loyal customer base.

He told me they'd open a BB, and price everything in the entire store at $0.50 a rental until the other two places went out of business. The chain could absorb the losses that the new location would incur. Then when the other places closed, they'd raise all their rates up to the regular $4 a rental. I never rented from a Blockbuster again.
 

Gooberlx2

Lifer
May 4, 2001
15,381
6
91
Yeah, this has been a long time coming. I gotta say though, the early form of Total Access (unlimited in-store exchanges) was a pretty awesome combination of services.
 

Soundmanred

Lifer
Oct 26, 2006
10,780
6
81
Blockbuster sucked. From the high rental prices to the aggressive collections tactics, to "losing" returned movies and charging you for them. I could go on all day. Stopped using them around 2000 and never regretted it.
 

SSSnail

Lifer
Nov 29, 2006
17,458
83
86
I could have saved Blockbuster myself from just my rentals but they sent me to collection for a late fee (which when they advertised no late fees ever) and it was for the video price and I returned the video to them and I hate their popcorn and they didn't have porn. They sealed their fate on that day.
 

guyver01

Lifer
Sep 25, 2000
22,135
5
61
the early form of Total Access (unlimited in-store exchanges) was a pretty awesome combination of services.

i had my Blockbuster Total Access when that was going.... watch the dvd at home... exchange it instore for a free rental, and they INSTANTLY ship the next dvd when they scan your old one in at the store... this was service.

once they removed that function.. i cancelled my memberships.
 

Squisher

Lifer
Aug 17, 2000
21,204
66
91
I have the unlimited rentals (2 at a time, can keep movies out for 30 days) for $30/mo. from them. I'll miss them if they shut my store down. It's nice getting a video the day it comes out yet being able to let it sit around so I can watch it at my leisure.
 
Oct 20, 2005
10,978
44
91
I rented gladiator for a school thing, and was too busy to return it for like 2 weeks. They sent me a collections notice. Redbox would have just charged me I think. This is why no one likes blockbuster.

Blockbuster express > redbox though.

That's your own damn fault. Too busy to return it...what a retarded excuse.