Blockbuster USA Files For Bankruptcy; UK Stores Unaffected

Jonathan Sutton

Nearly 25 years after opening its first store in Dallas, Texas on the 26th of October 1985, Blockbuster Inc. yesterday filed for Chapter 11 bankruptcy in a New York court, having experienced a severe drop in revenue in recent times due to increased competition from online DVD rental services such as Netflix and self-service DVD vending kiosks like Redbox.

The largest movie rental company in the world, Blockbuster dominated the DVD-renting physical store landscape in the USA, but over the years failed to adjust its business model quickly enough to embrace mail order and online distribution methods which became increasingly popular among the DVD rental crowd.

By the time Blockbuster launched its own DVD rental subscription service in 2004, pioneering rival Netflix already had a 5-year head start. Blockbuster was also 5 years late to the self-service DVD vending scene, installing its first Blockbuster Express Kiosk only in 2009 when market leader Redbox had been operating since 2004.

And with the growing prevalence of faster broadband speed and internet-connected TVs, more and more consumers will be tempted to try out digital movie download and streaming, which will sure bring into further question the relevance of physical storefronts.

Declaring debts of $1.46 billion compared to assets of $1.02 billion in the Chapter 11 petition filed in New York United States Bankruptcy Court, Blockbuster announced that it has secured a $125 million loan to cover its existing day-to-day operation during the debt restructuring process. Blockbuster’s Chief Executive Officer (CEO) Jim Keyes remained optimistic about the future of the company, claiming that it still commands a well-known brand name, and offers more distribution channels (physical stores, vending kiosks, mail delivery and online) than competitors.

Blockbuster stores in the United Kingdom will continue to operate as normal, and remain unaffected by this bankruptcy filing, as they are separate entities from the US business.