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The Renaissance Tower in Dallas
Blockbuster Headquarter. |
Movie rental giant
Blockbuster files for bankruptcy this morning at the height of recession aftermath. Insiders said that there is no more way to revive the company that bankcruptcy is inevitable. The company had started in 1985, and once the dominant in the movie and game rental business for many years until the coming of global recession in 2008 and fierce business competition from
Netflix and
Redbox, made the company unable to recapture strategic position and failed miserably to regain financial losses.
Since the first opening of the business back in 1985, the company grew to more than 4,500 rental stores with 47 million strong customers daily, making it the largest movie rental company in the US.
Reviving the Empire
There had been several attempts to revive the company to compete with big players in the movie rental business. In 2009, Blockbuster had secured $125 million in financing and partnered itself with
NCR to offer online rental movie services and in-store kiosks similar to Redbox and Netflix. But as early as February, 2010, Blockbuster had to shut down most of its outlets in Portugal and closed more 2,000 stores which includes 1,500 rental stores that were already closed last year in the US.
Despite its best efforts to compete, the company loses again more than $550 million in 2009 and around $375 million in 2008. This is according to the
recent 10-K filing with SEC. This prompted
Price Waterhouse Coopers, an independent public accounting firm which the company had hired to audit its books, advised the company that it is has become a big concern and may be unable to service the $1Billion debt from its lenders and investors.
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| Redbox retail rental kiosk |
Premature Demise?
By July 2010, the New York Stock Exchange had delisted the company due to the share price trading of less than $1 per share. In August, Blockbuster was planning on filing a pre-packaged
chapter 11 bankruptcy on September with a carrying debt of about $900 million. As analysts and investors watch the inevitable downfall of a giant enterprise, Netflix from Los Gatos California reached $156.97 intraday trading, so far the highest record since the company began in 1997.
For Redbox, the company is enjoying its position in the business. It just entered into an agreement with Warner on February 2010, followed by Universal and Fox on April of this year.
It is just unfortunate that a business like this size will end this way. I've been a long time customer of the company for straight eight years now, and I thought that the company was great and I really appreciate their business. Will we be able to see a comeback of the company in the near future, or this will be the ultimate extinction of another giant in the struggle for economic existence?
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