It seems that Blockbuster video/DVD rental chain is lumbering one step closer to oblivion as it plans to file for something it calls "pre-planned bankruptcy." The company is the latest victim of our move to a digital, ethereal existence.
The company is in a pretty deep hole, and hopes that Chapter 11 will give it some breathing room:
Blockbuster is hoping to use its time in Chapter 11 to restructure a crippling debt load of nearly $1 billion and escape leases on 500 or more of it 3,425 stores in the U.S. Maintaining the support of Hollywood's film studios during the process will be critical so that Blockbuster can continue to rely upon an uninterrupted supply of new DVDs.
Blockbuster has lost a total of $1.1 billion since the beginning of 2008 and has been severely hamstrung in efforts to grow its business due to interest payments on $920 million in debt. Earlier this month the company announced that most of its debt holders had agreed to a forbearance on interest payments until Sept. 30, during which time it would attempt a recapitalization.
Last year alone, Blockbuster shuttered almost 1,000 stores. The company plans to branch out to DVD rental kiosks if it survives restructuring.
The flaw in Blockbuster's business model is that it's failed to keep up with the times. The days of people driving down to a video store (even the name is archaic) to pick a movie are, well, gone. Just like having photos developed, buying physical CDs and books , and visiting the bank, people are turning to a digital way of life. Even Netflix, which started life as a company mailing DVDs to customers, has had to evolve.
That's how it is now - evolve, or die.
There are still a lot of things that need to fall into place before streaming really takes off, but the decline of the rental store will definitely help things along.