Monday, September 27, 2010
Blockbuster to File for Bankruptcy
Blockbuster is currently preparing to file Chapter 11 bankruptcy. The movie rental chain may officially announce its plans to the general public as early as later in the week.
Earlier this year, Blockbuster executives announced a plan to close approximately 10% if its stores nationwide as an increasing number of customers have turned to online alternatives such as Netflix. Currently, the video retailer is shouldering about $900 million in debt.
According to their bankruptcy plan, Blockbuster will attempt to continue doing business while they work to pay off their debt. This reorganization will most likely result in the closing of many more retail outlets.
Blockbuster's bankruptcy has also created a significant problem for many landlords who have been forced to take back many leased premises as a result of the store closings. In the current real estate market, landlords may face considerable challenges re-renting many of these spaces.
One of Blockbuster's rivals, Movie Gallery Inc., declared bankruptcy earlier this year. While the company, which operates the Hollywood Video rental chain, initially intended to reorganize, they ultimately decided on liquidation instead. This decision was largely based on concerns over whether the in-store video rental business model is still viable given alternatives such as Netflix and Red Box.
Blockbuster remains committed to moving through bankruptcy with a goal of creating a better business model which will leave them in a stronger position once they have settled their debts.