It certainly has been a painful struggle to watch. After months of delaying the seemingly inevitable, Blockbuster filed paperwork in the Southern District of New York Court Thursday morning to declare Chapter 11 bankruptcy.
The one-time video rental giant, and one of the pioneers of the industry, is asking for protection against numerous creditors, to whom it owes over $1 billion dollars in debt.
The decision doesn’t mean the end for all of Blockbusters business operations. Though the company has decided to close all but a few of their stores, they’ll still continue to attempt to build the relatively new kiosk and online services.
“The recapitalized Blockbuster will move forward better able to leverage its strong strategic position, including a well-established brand name, an exceptional library of more than 125,000 titles, and our position as the only operator that provides access across multiple delivery channels—stores, kiosks, by-mail and digital,” said Jim Keys, Blockbuster’s CEO . “This variety of delivery channels provides unrivaled convenience, service, and value for our customers.”
According to court documents, the company’s largest creditors will have rights to equity after the reorganization, but smaller creditors and stockholders are losing out on any stake they may have hoped to claim.
Among the major creditors listed are several large film production companies including Universal, 20th Century Fox, Warner Home Video, and Sony Pictures. Blockbuster owes over $50 million dollars to these studios alone. Despite this fact, these companies are continuing to work on future distribution deals with Blockbuster.
Let’s hope that for the sake of Blockbuster’s future that company executives consider some improvements to the services they are planning to focus on. The new Games by Mail service sounds great in theory, but has some serious flaws in practice. Kiosks for travelers to download digital movies on SD cards also seems like a great service, but at $12 per movie a passenger would be more likely to take advantage of in-flight DirectTV, which was only $6 when I travelled last month. Blockbuster definitely has a lot of work to do in the coming months if they want to regain the success they once had.