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Blockbuster Bankruptcy?

The bad news just keeps on coming for beleaguered movie rental giant Blockbuster, but is anyone really surprised? Yesterday, the LA Times reported that Blockbuster chief executive Jim Keyes was in LA to discuss plans for a possible “pre-planned” bankruptcy in September. Apparently, he met with executives at several studios including Paramount Pictures, Sony Pictures, Walt Disney Studios, and 20th Century Fox. The support of these studios is necessary for Blockbuster, which will need to rely on them for new releases during the bankruptcy and subsequent restructuring.

Blockbuster hopes to spend only six months in restructuring, but the process will undoubtedly be painful. The company is $920 million in debt and needs to restructure leases on at least five hundred of their three thousand five hundred US stores. The firm also plans on refocusing on non-retail spaces; apparently they’ve started to manufacture Blockbuster brand kiosks (much like Redbox) that will rent DVDs for a dollar.

In order to be successful, Blockbuster needs to do several things. Firstly, they need to pay closer attention to the profitability of each of their stores. Last year, Blockbuster shuttered around a thousand of their brick and mortar operations when they discovered that the stores weren’t making any money; frankly, the fact that executives didn’t realize this ahead of time makes them look careless. Secondly, Blockbuster needs to adopt a better price plan – something cheaper and consistent. Does anyone really know what late movie charges are? Thirdly, Blockbuster needs to improve the customer experience. Mom and pop rental operations seem to be doing okay – this might have something to do with the fact that their staff is friendly, knowledgeable about movies, and more willing to carry hard to find items (like RoboGeisha) than Blockbuster.

Of course, that much change is a fairly tall order, and it seems doubtful that Blockbuster can cope. The last time I was in one of their stores, the seventeen-year-old cashier spent ten minutes on his cell phone before telling me that he hadn’t heard of American Beauty.

Good riddance, Blockbuster.

– Dave Robson