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Blockbuster Files for Bankruptcy; Wipes Out Shareholders But Keeps Stores, Rent-by-Mail Service Open

Phillip Dampier September 23, 2010 Consumer News, Online Video 4 Comments

Blockbuster, Inc. announced this morning it was filing for Chapter 11 bankruptcy protection under a plan that cuts nearly $1 billion in debt and delivers a financial rescue package to help reorganize its operations.

The company, based in Dallas, faced insurmountable challenges from online video, piracy, pay-per-view, Netflix, and most recently Redbox — video kiosks strategically placed in supermarkets and drug stores.

But despite the bankruptcy filing, which wipes out the company’s shareholders, Blockbuster said it would keep its 3,400 company-operated and franchise stores, its DVD by-mail business, and online operations open for business.  Those holding Blockbuster coupons and gift cards need not worry — the company will continue to honor both.  Some unprofitable store locations may be closed later.

Netflix and Redbox are among the biggest contributors to Blockbuster’s financial demise.  Netflix’s 15 million customers dwarf Blockbuster’s 2.6 million customer rent-by-mail operation.  Redbox has more than a 13,000 store kiosk advantage over Blockbuster.

Shareholders blamed Blockbuster CEO Jim Keyes for the company’s financial position.

“Jim Keyes is the main reason Blockbuster is in this position today due to his denial of being in a business model that did not work anymore,” said Niko Celentano. “If Jim Keyes would have seen the changes that were evolving in this industry in the past few years, Blockbuster would not have been in the courts today filing Chapter 11 bankruptcy.”

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Paul
Paul
13 years ago

Time Warner; Frontier, (local TelCo’s etc…) Pay Attention!! This is what happens when a company decides to stick with the ‘tried and true’ approach; watch the outcome here; ya might learn somethen.

Jeff
Jeff
13 years ago

I know a lot of folks hate blockbuster for their sins. For me, I only have pleasant memories of them over the years. But that’s all they are – memories. I switched over to Netflix a few years ago.

I agree with Paul (see previous post) – this is a textbook case of a company that ignores how the people want to consume a given product or service.

Scott
Scott
13 years ago

I used to be an avid customer of theirs until competition came along such as Netflix and while I loved the brick ‘n mortar store experience, but years of paying 3 times more in late fees than the actual rental costs just drove me over the edge. That’s just not a good way to build customer loytalty by gouging your customers when the competition down the road is honest and straight forward with a no hassle service.

I did try Blockbuster and Walmart but Netflix always had the better logistics for getting DVD’s out quicker than the competition.

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