Netflix, which has already proven to be recession resistant, could find itself with an open field of growth ahead as its primary bricks-and-mortar competition struggles.
Throughout its history, Netflix has competed with Blockbuster. And its rival has sometimes made Netflix's profit margins shrink. But now the viability of Blockbuster is being questioned as the company retains bankruptcy counsel and attempts to restructure debt (Techmeme).
After market close Tuesday, Blockbuster confirmed a Bloomberg report as it said that it would report fourth quarter earnings March 19. Blockbuster said:
The company will discuss the status of its efforts to refinance the portions of its senior credit facility which are scheduled to mature on Aug. 20, 2009. In this regard, the company has hired the law firm of Kirkland & Ellis LLP to advise it with respect to its ongoing financing and capital raising initiatives.
It's unclear whether the bankruptcy concerns, which will possibly last through Aug. 20, will affect consumer demand at Blockbuster, but it certainly could help Netflix.
Digital distribution was already nailing Blockbuster's business model, but bankruptcy concerns may just speed up the inevitable.
Also see: Netflix adds 600,000 subscribers since Jan 1; Tops 10 million subscriber mark
Perhaps Netflix is a bit recession proof.