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Blockbuster files for bankruptcy in face of Netflix, digital

updated 08:20 am EDT, Thu September 23, 2010

Blockbuster in Ch. 11 bankruptcy to focus online

Blockbuster this morning followed through on expectations and filed for Chapter 11 bankruptcy as part of its shift into online video. The move gives it an opportunity to reorganize and would exchange the company's 11.75 percent in senior notes for equity stakes. Refinancing, cost cutting and other measures would reduce the movie rental store's debt from $1 billion to $100 million or less.

All retail and online businesses should keep running during the bankruptcy period, the company said. Stores outside of the US shouldn't be affected by the plans.

The filing is expected to help "transform [Blockbuster's] business model" and help it focus on Internet sources by reducing its dependence on retail. In-store rentals were once its cornerstone, but the market for renting by title has been gutted by faster-moving Internet rivals. Netflix is usually given primary credit, as its mail-order but Internet-based service is both much less expensive than renting from Blockbuster but gives access to a much wider catalog that is often impossible to match in a retail store. Blockbuster was forced to introduce its Direct Access service and flat-rate service to match.

The company has also had a poor standing versus direct Internet streaming. Although it has an online service of its own, the platform has a much smaller footprint on hardware than Netflix and struggles to gain recognition compared to iTunes, whose service has the advantage of working on iPads, iPhones and iPods for years where Blockbuster has only recently reached mobile through Android.




by MacNN Staff

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Comments

  1. coffeetime

    Joined: Dec 1969

    +5

    In Memory of Blockbuster

    Blockbuster was the king of video rental store back when the VCR/VHS was the standard. They were also laughing at Netflix as how Ballmer was laughing at iPhone. How time has changed. I wonder how long will iPhone last or will it be the standard forever. After Steve is gone, can those executives handle the challenges or they would just give up like what those idiots did to Newton. Steve Jobs is truly a visionary.

  1. Feathers

    Joined: Dec 1969

    +1

    renting by title?

    Uh...I think people still rent by title. How they chose the title is different, that is, online as opposed to walking into a store.

  1. erics

    Joined: Dec 1969

    -2

    Steve?

    Steve J is that you posing as cofeetime :)
    I only rent or buy BD.

  1. rvhernandez

    Joined: Dec 1969

    +4

    Late fees...

    Goodbye and good riddance. F you and your late fees for being 5 minutes late!

  1. icewing

    Joined: Dec 1969

    +1

    "Transform Blockbuster's business model"

    too bad they didn't realize they needed to do this, oh, say a few years ago?

    @rvhernandez Amen!! I'm not sorry to see them crash and burn - their business model was always about abusing their customers as much as possible.

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