To the surprise of no one who has been paying attention to the current state of the DVD rental business, Blockbuster today filed for Chapter 11 bankruptcy protection. Saddled with a rather large debt, the one-time titan of the rental industry will seek to reorganize and carry on.
The LA Times reports that this filing would erase nearly $1b in debt (that’s only a quarter of what MGM is saddled with!) and keep the chain’s stores, kiosks and online business in operation through the next few months as the reorganization takes place. Part of that reorganization process will involve closing hundreds of stores; at least 500 and possibly as many as 800 are expected to be shuttered.
This move is almost exactly on pace with the company’s plans; Blockbuster announced in August that a bankruptcy filing could be expected in mid-September.
LionsGate majority shareholder Carl Ihan will end up owning a majority of Blockbuster when this is all said and done. CEO Jim Keyes is expected to keep his post, however. The big change, beyond the financial structure, will be the one we’ve known was going to happen, as Blockbuster emphasizes kiosks and online rentals more than ever before.
I’m still not much convinced that the change or loss of Blockbuster is a bad thing. The chain lost my sympathy when it rented censored versions of movies starting in the ’90s, and in the wake of the innovations of Netflix, Blockbuster hasn’t earned back my interest or sympathy.
But studios are supportive of Blockbuster, which is one reason the company will continue to exist. Despite the fact that major movie studios are among the company’s largest creditors, the LA Times reports that studios are more interested in preserving a competitor to Netflix and Redbox. So the blue DVD giant isn’t by any means out for the count.