A Trusted Bankruptcy Team
Bankruptcy News
Internet Fail: Blockbuster Reportedly Plans Bankruptcy
Blockbuster CEO Jim Keyes and a team of restructuring consultants reportedly met with all the major Hollywood studios last week to tell them about a plan to file bankruptcy before interest payments come due on nearly $1 billion in secured debt at the end of next month. The company might be able to survive by restructuring its debt, according to LA Times – but even a restructuring could entail bankruptcy.
Either way, the company is in big trouble.
Just as video stores once failed to compete with Blockbuster’s larger inventory, the retail chain now can’t compete with Amazon, Netflix, on-demand cable-satellite, and other means of delivering video entertainment that don’t involve going to a store — even as it struggled to keep up, offering DVD-by-mail option.
The irony must be bitter for Blockbuster that as it was preparing for a potential bankruptcy, its once-upstart competitor Netflix was busy ramping up with an iPhone app that streams movies and television shows directly to Apple’s popular devices.
Blockbuster must know how sweet that victory tastes, having itself driven mom-and-pop video stores across the country into bankruptcy through the rapid expansion of their brick-and-mortar stores, which could lose money in one neighborhood while making money in another in order to starve out non-networked competition.
But unlike with those shops, bankruptcy may not be the end of the line for the Blockbuster brand, whose stock the New York Stock Exchange delisted last month due to its sub-$1 stock price.
Keyes and his team met with several heavy hitters — executives from 20th Century Fox, Paramount Pictures, Sony Pictures, Universal Pictures, Walt Disney Studios and Warner Bros. — to tell them about its hope for a successful restructuring, according to the report. The studios have good reason to want Blockbuster to survive. Not only was it a profitable partner during the DVD craze, despite the occasional censorship spat, but the company provides competition to Netflix, Amazon, Hulu, iTunes and other internet-based video services. And more competition in that market means higher licensing prices for the studios’ videos.
Blockbuster has yet to confirm the Times‘ article, and a spokeswoman said the company might not be able to answer our questions about how it plans to move forward today (we’ll update if so).
One way or another, the company is under lots of pressure. But after a last-ditch effort to extend its August 13 deadline to pay interest on $920 million in secured debt until the end of September, Blockbuster must try to restructure itself so that major debt holders end up owning most of the company, according to the LA Times – and even that could involve filing for bankruptcy.
Among other things, a Chapter 11 bankruptcy would allow the company to slip out of the leases for 500 or more of its 3,425 stores, allowing it to close hundreds more in the coming months in addition to the nearly 1,000 it shuttered last year, when bankruptcy rumors first started flying.
Blockbuster spokeswoman Patty Sullivan painted as optimistic a picture as possible in a statement to Wired.com (updated):
As we reported in our Q2 earnings announcement and continue to communicate, we continue to explore all of our options and are making good progress in our recapitalization process. Our discussions with the studios and bondholders continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future. We appreciate the support of a wide range of parties as we work toward putting in place a more appropriate capital structure to support Blockbuster’s long-term growth, including investments in our multi-channel platform and new opportunities.
But is it too late for the beleaguered behemoth?
A typical Hollywood ending would involve Blockbuster springing back off of the ropes post-bankruptcy, Rocky-style, to reinvent itself as an Android set-top box partner or something similar. However, this old, indebted puncher may not have enough fight left in it to go another round.
http://nobosh.com/sr/internet-fail-blockbuster-reportedly-plans-bankruptcy/383472/
Either way, the company is in big trouble.
Just as video stores once failed to compete with Blockbuster’s larger inventory, the retail chain now can’t compete with Amazon, Netflix, on-demand cable-satellite, and other means of delivering video entertainment that don’t involve going to a store — even as it struggled to keep up, offering DVD-by-mail option.
The irony must be bitter for Blockbuster that as it was preparing for a potential bankruptcy, its once-upstart competitor Netflix was busy ramping up with an iPhone app that streams movies and television shows directly to Apple’s popular devices.
Blockbuster must know how sweet that victory tastes, having itself driven mom-and-pop video stores across the country into bankruptcy through the rapid expansion of their brick-and-mortar stores, which could lose money in one neighborhood while making money in another in order to starve out non-networked competition.
But unlike with those shops, bankruptcy may not be the end of the line for the Blockbuster brand, whose stock the New York Stock Exchange delisted last month due to its sub-$1 stock price.
Keyes and his team met with several heavy hitters — executives from 20th Century Fox, Paramount Pictures, Sony Pictures, Universal Pictures, Walt Disney Studios and Warner Bros. — to tell them about its hope for a successful restructuring, according to the report. The studios have good reason to want Blockbuster to survive. Not only was it a profitable partner during the DVD craze, despite the occasional censorship spat, but the company provides competition to Netflix, Amazon, Hulu, iTunes and other internet-based video services. And more competition in that market means higher licensing prices for the studios’ videos.
Blockbuster has yet to confirm the Times‘ article, and a spokeswoman said the company might not be able to answer our questions about how it plans to move forward today (we’ll update if so).
One way or another, the company is under lots of pressure. But after a last-ditch effort to extend its August 13 deadline to pay interest on $920 million in secured debt until the end of September, Blockbuster must try to restructure itself so that major debt holders end up owning most of the company, according to the LA Times – and even that could involve filing for bankruptcy.
Among other things, a Chapter 11 bankruptcy would allow the company to slip out of the leases for 500 or more of its 3,425 stores, allowing it to close hundreds more in the coming months in addition to the nearly 1,000 it shuttered last year, when bankruptcy rumors first started flying.
Blockbuster spokeswoman Patty Sullivan painted as optimistic a picture as possible in a statement to Wired.com (updated):
As we reported in our Q2 earnings announcement and continue to communicate, we continue to explore all of our options and are making good progress in our recapitalization process. Our discussions with the studios and bondholders continue to be productive and we have every reason to believe we will come out of the recapitalization process financially stronger and more competitively positioned for the future. We appreciate the support of a wide range of parties as we work toward putting in place a more appropriate capital structure to support Blockbuster’s long-term growth, including investments in our multi-channel platform and new opportunities.
But is it too late for the beleaguered behemoth?
A typical Hollywood ending would involve Blockbuster springing back off of the ropes post-bankruptcy, Rocky-style, to reinvent itself as an Android set-top box partner or something similar. However, this old, indebted puncher may not have enough fight left in it to go another round.
http://nobosh.com/sr/internet-fail-blockbuster-reportedly-plans-bankruptcy/383472/