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Blockbuster bankrupt in September after Internet pressure

updated 09:05 am EDT, Fri August 27, 2010

Blockbuster warns of imminent bankruptcy

Blockbuster is on the verge of declaring bankruptcy under the weight of competition from Internet services, sources said late Thursday. Attendees of a top-level meeting told the LA Times that Blockbuster was warning major movie studios of a "pre-planned" Chapter 11 bankruptcy likely for mid-September. The move would give it a chance to reorganize, offloading at least some of its $920 million in debt and letting it out of lease requirements for at least 500 failing stores.

The chain was compelled to talk to the studios as it wanted to reassure them that Blockbuster would still exist and keep the flow of movies intact. Bankruptcy would give significant control of the company to debtors and could cast doubt on the events without advance notice.

Spokespeople from the company didn't comment on the claims.

Blockbuster's fall has been years in coming but has accelerated rapidly in recent months as it has been overwhelmed by Internet-based competitors, most of all Netflix. The failing company has a small Internet video service backed by CinemaNow but also has the burden of a primarily store-based rental system; its stores can only carry a limited amount of stock and are tied to a per-movie rental system. Netflix has its own, more popular Internet service and for physical copies isn't tied to expensive stores with limited stock, instead providing a much wider selection through the mail.

Pure Internet video has also had an impact. Apple's iTunes is commonly considered the largest per-title rental service, but the Zune Video Marketplace on the Xbox 360, Amazon Video On Demand and others also give customers little incentive to visit a real-world store. To support Blockbuster and discourage these services and Netflix, movie studios have tried to impose delays on availability, but these have had relatively little effect.

by MacNN Staff



  1. Mr. Strat

    Joined: Dec 1969


    And the loss is???

    I used to rent a lot of videos from Blockbuster but got sick of bringing home a movie and the disc looking like someone had dragged it behind their car. New releases were rarely in stock...the employees were retards.

  1. vasic

    Joined: Dec 1969


    From another era

    When I think Blockbuster, I immediately think - VHS. They just let the world pass them by and stayed in the old model, which simply doesn't work anymore. It has been almost ten years since I rented my last movie from Blockbuster. Video-on-demand has replaced Blockbuster's function, and I can't think of a reason to ever go back to a physical store again.

  1. testudo

    Joined: Dec 1969


    Re: From another era

    Video-on-demand has replaced Blockbuster's function, and I can't think of a reason to ever go back to a physical store again.

    Actually, Netflix replaced Blockbuster's function, and Blockbuster didn't realize it until it was way too late. Cable had PPV and all that for years and it didn't kill Blockbuster more than "You mean I can just get them sent to me?"

  1. gmsquires

    Joined: Dec 1969


    They just purchased Red Box

    How do they purchase Red Box and now want to declair Chapter 11. All of the Red Box machines in local Safeway stores here in the SF Bay area are now Blockbuster rental machines. My roommate who uses Netflix predominantly and the library for his videos, aslo uses Red Box sometimes. He said he will not be using Blockbuster due to their penchant for providing edited/censored movies.

  1. lkrupp

    Joined: Dec 1969


    Same goes for Blu-ray...

    The physical media is going away. To the ones who constantly beat the drum for Blu-ray on the Mac I say wake up and take notice. I haven't set foot in any video rental store since my wife gave me an AppleTV for Christmas two years ago. Believe me 720P is good enough for 99% of viewers. Netflix gets it and I predict they will be all streaming in a very few years. Just like the century old POTS telephone line (landline) is being supplanted by wireless and voip so physical media is 20th century technology being supplanted by packet switched networks.

  1. Grendelmon

    Joined: Dec 1969


    It's too bad

    My wife and I were online Blockbuster subscribers for years. They had a good thing going where you could exchange your mail DVDs for free rentals at their stores. We eventually switched the Netflix only because Blockbuster closed two of their closest stores to us.

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