Vidtailer to file for Chapter 11 in September
Here’s how much the landscape of Hollywood’s homevideo biz has shifted over the years: Netflix is readying to pay Epix $1 billion for a slate of movies, while Blockbuster is being taken down by $1 billion in debt.
Blockbuster has alerted studios that it plans to file for bankruptcy in mid-September.
Sources told Daily Variety that the long expected move to file for Chapter 11 bankruptcy is under way.
Blockbuster has struggled to deal with its $1 billion debt load and figure out a way to fend off fast-growing rivals like Netflix and Redbox, who cater to customers who prefer not to visit one of the homevideo chain’s 3,425 stores.
Through the restructuring process, as many as 800 stores could close and the rest of the company’s assets could be divided among debt holders. The company had already shuttered 1,000 stores.
Earlier this month, Blockbuster reported dismal second quarter losses of $69 million, up from $37 million from the previous year. Revenue fell 20% to $788 million during the period from a year ago. Blockbuster had also been de-listed from the New York Stock Exchange in July.
Dallas-based Blockbuster has been eying digital downloads, renting videogames, bringing back late fees, sending videos by mail to customers and licensing its brand on rental kiosks at convenience stores and other locations, via NCR Corp. But it has been unable to make up the money that the company has been losing.
Either way, Blockbuster needs the support of the studios to survive. It’s renegotiated more financially favorable deals with the majors for DVD and Blu-ray inventory, and set up pacts in which it can rent movies day-and-date with their retail sales launches — something Netflix and Redbox have agreed in most cases to hold off on doing until 28 days later.
Hollywood still considers Blockbuster an important enough revenue generator for its homevideo divisions, which have seen earnings decline, ironically, due to an increase in cheaper rentals as consumers opt to buy fewer DVDs and Blu-rays during the economic downturn. Studios also don’t want to see Blockbuster shutter because the company owes them considerable coin in back payments.
The entertainment biz has already watched Movie Gallery, behind Hollywood Video, close shop earlier this year.
Creditors seem to want to keep Blockbuster alive, as well.
They have repeatedly delayed debt payments, with a $42 million payment delayed to next month.
“While making progress, this extension allows additional time to complete these complex, multiparty negotiations,” Blockbuster CEO Jim Keyes said in a statement while announcing its latest quarterly earnings.
“Our objective is to complete a recapitalization as soon as possible so we are better positioned to focus our attention and resources on the strategic opportunities to continue our business transformation.”