Viacom Inc. purchased Blockbuster for $8.4 billion in 1994, the company’s current value is estimated to be $24 million. In July 2010, the New York Stock Exchange delisted Blockbuster’s stock which closed at 11 cents August 26, 2010. Times said Blockbuster informed Hollywood’s studio heads of the impending bankruptcy hoping it can keep their support during this difficult time. Those partnerships are key as Blockbuster reportedly seeks a “pre-planned” bankruptcy, meaning many of its creditors would work with them.
Creditors don’t benefit if the company goes completely out of business, as they then stand no chance of getting their money back. That would give Blockbuster a better chance of coming out the other side of these proceedings.It won’t be easy as Blockbuster’s debt load is more than $1 billion, according to The L.A. Times. The company is hoping the Chapter 11 will lighten that load and get it out of leases on at least 500 of its weaker-performing stores. It already closed 1,000 stores in the past year.
Blockbuster isn’t alone in its struggles. The nation’s second largest chain, Hollywood Video, went out of business earlier this summer (2010). That increases the likelihood that major movie studios will work with Blockbuster to keep the rental marketplace strong and competitive.
Part of Blockbuster’s strategy going forward will be adopting some of its competitors’ sales methods. It recently unveiled its mail order rental plan for movies and games and has put out 6,000 Redbox-style kiosks with the Blockbuster brand on them.
In the 1990s, Blockbuster Video was the definition of success. It was the biggest name in the video rental market and then owner Wayne Huizenga was a high roller who counted the NFL’s Miami Dolphins, pro baseball’s Florida Marlins and hockey’s Florida Panthers among his holdings.
Litttle did we known the era of Netflix was at hand, though. Thanks to mail video rental services such as Netflix, mail game rental led by GameFly and the ever growing trend of digital downloads, Blockbuster Video fell from the main option to an afterthought.