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  (Source: islandpacket)
Rivals like Redbox and Netflix took over the video-renting market

After a failed attempt at trying to transition from a storefront model to renting through the mail and on the Internet like Netflix, Blockbuster Inc. has filed for bankruptcy
 
The world's largest movie rental company filed for Chapter 11 September 23 in U.S. Bankruptcy Court in New York, with a petition that showed assets of $1.02 billion against $1.46 billion of debt. Blockbuster settled on a plan with bondholders, who hold 80.1 percent of Blockbuster's 11 3/4 percent senior-secured notes, to restructure and secure a $125 million loan "to finance operations."

This $125 million is new cash availability, and $45 million would be available before final approval on an interim basis. This secured financing also requires the conversion of $250 million of existing secured debt "into a new loan with a lien ahead of existing debt." The new plan states that no recovery by holder's of Blockbuster's outstanding subordinated debt will be allowed, and the company hopes to pay an undesignated amount to unsecured creditors. Twelve Blockbuster units joined this protection, including Blockbuster International Spain Inc., Blockbuster Canada Inc. and Blockbuster Video Italy Inc. 

"To preserve its three-decade long developed brand value, Blockbuster seeks a restructuring that permits a significant deleveraging of its business so that it can move forward at the digital clip at which its industry and competitors are currently running," said Jeffery Stegenga, the company's restructuring officer. 

Several companies are waiting to be paid by Blockbuster, including Twentieth Century Fox Home Entertainment with a $21.6 million claim. Others waiting in line are Warner Home Video Inc. with a $19 million claim, Sony Pictures Home Entertainment with a $13.3 million claim, Coca-Cola Enterprises with a $703,412 claim and Moelis & Co. with a $254,050 claim.

Before coming to this decision to claim bankruptcy, Blockbuster spoke with other companies throughout the spring and summer in hopes of making a financial deal, but none of them could provide enough money to cut Blockbuster's debt significantly. 

Several reports note that Internet and mail-based companies like Netflix as well as rentals available in vending machines like Redbox have destroyed Blockbuster's store-based model. Blockbuster attempted to transition to this type of model with express kiosks they called "Bluebox," and obviously it failed. 

All of Blockbuster's stores, kiosks and digital businesses will resume as normal, and coming out of bankruptcy, the only debt the company will have to pay is the $125 million loan.



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Surprise!
By DEVGRU on 9/24/2010 1:26:51 PM , Rating: 2
Shock.

Awe.

NOT.




RE: Surprise!
By WLee40 on 9/24/2010 2:33:03 PM , Rating: 2
This is good news for me. I bought Netflix stock last year when I found out that TVs and BD players will have Netflix capabilities. My only regret is that I didn't put more of my savings into it!


RE: Surprise!
By fr0meta on 9/25/2010 2:26:05 PM , Rating: 4
<Bondholder>...Blockbuster, it shows in the system that you owe 1.46 billion in late fees...


RE: Surprise!
By aharris on 9/25/2010 8:48:45 PM , Rating: 3
Blockbuster can take their pricing model and shove it! Redbox and Netflix absolutely hit them where it hurts. I'm glad to see it finally happen, and even more so after discovering the huge stake the movie industry had in Blockbuster.

Something about BB removing their late fees to drive competitors out of business, then reinstating them when they were the last ones standing that absolutely rubbed me wrong. That and $5 2-day movie rentals. And then raising the rental prices. And that ridiculous game rental pricing. And removing the second day from that $5 movie rental. And not having a centralized database to handle customer accounts. And... on and on and on.

Enjoy going down because you refused to adapt to the changing demands of consumers. Now if only we could find a solution to the film-licensing-on-multiple-mediums problem...


RE: Surprise!
By YashBudini on 9/27/2010 10:16:13 PM , Rating: 2
quote:
Something about BB removing their late fees to drive competitors out of business, then reinstating them when they were the last ones standing that absolutely rubbed me wrong. That and $5 2-day movie rentals. And then raising the rental prices. And that ridiculous game rental pricing. And removing the second day from that $5 movie rental.

Sounds like their mentor was Bank of America.


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