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Rumors Of A Blockbuster Bankruptcy Filing Just Delay The Inevitable

by Sean P. Aune | March 21, 2010March 21, 2010 11:17 am PDT

While everyone has known for some time that video rental chain Blockbuster is in trouble, a regulatory filing with the SEC (Security and Exchanges Commission) last week painted an even bleaker picture than many had imagined.

In its most recent 10-K filing, Blockbuster pulled no punches and admitted, “the increasingly competitive industry conditions under which we operate has negatively impacted our results of operations and cash flows and may continue to in the future. These factors raise substantial doubt about our ability to continue as a going concern.”  Or in more plain English, Blockbuster Netflix and Coinstar, Inc.’s Rebbox DVD rental kiosks are kicking its behind.  Although the company had revenues of $1 billion in the fourth-quarter ended Jan. 3, 2010, it had an operating loss of $394 million in the period.

rentalstoresAll of this doom-and-gloom, compounded by hints that the company would file for bankruptcy protection and potentially closing more of its stores, sent the stock down 29% to a mere 28 cents a share the day the news came out.

When you add in the fact that the Movie Gallery chain, which also owns Hollywood Video, filed for Chapter 11 bankruptcy last month, and plans to close 760 stores, our predictions from the previous Blockbuster Is Dead post just seem to be coming true faster than even we anticipated.  The outside forces on these companies who make the majority of their income from video rentals has just gotten to great for them to survive.  Blockbuster said in its filing that it expected single-digit loses of same store sales to increase to double-digit loses this year, so it is even trying to sugarcoat the possibility that it can turn the ship that is its brick and mortar stores around.

To fend off a total collapse, the company has already set up 2,500 kiosks like those operated by Redbox called “Blockbuster Express.”  The company is aiming to increase that number to 10,000 by the end of this year.  The company is also hoping to expand its digital offerings for streaming video through more strategic alliances with companies such as Samsung, Motorola, T-Mobile, TiVo, Suddenlink and Vizio.

Of course the ultimate question is if this all too little, too late.  The Blockbuster name is a highly recognizable brand to be sure, but it is also one that has become synonymous with the old way of doing video rentals.  Netflix has a huge head start in the streaming category with its software popping up in every device imaginable, and everyone knows what those bright red boxes that belong to Redbox mean.  It feels like Blockbuster is doing nothing but playing catch up and isn’t trying to be innovative or the least bit original at this point.  That sometimes backfires with consumers because they feel a loyalty to the brands that pioneered the sectors, and they see those who copy them as cheap knock offs.

Can Blockbuster save itself at this point?  I would actually like to be optimistic and say that I feel they could, but I honestly feel like I would be doing a disservice to everyone if I did.  The company sat around as the king of the proverbial hill for so long that it paid no attention to the upstarts that were springing up around it as it felt untouchable.  Sadly the company is now paying the price.

What say you?  Is Blockbuster doomed?  Is there any way it can still salvage itself, or is it merely delaying the inevitable?


Sean P. Aune

Sean P. Aune has been a professional technology blogger since July 2007, but his love of tech dates back to at least 1976 when his parents bought...

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