Blockbuster Inc. has just announced that they will soon require bankruptcy protection. This has resulted from declining sales and rising online competition. In fact, its shares have plummeted 30 per cent today alone. So, needless to say its not a good time to be a Blockbuster stock holder. Ouch.
According to The Globe and Mail:
“The one-time king of movie rentals is a victim of new technology and its own sluggish strategy to counter the onslaught of new forms of competition in recent years, leaving investors to wonder now whether there is enough time to turn the company around.”
Blockbuster has responded to calls for action by pitching the conversion of senior debt into common stock, which “will dilute current shareholders’ holdings.” Blockbuster also mentioned the possibility of liquidating its Canadian assets in order to make their payments to movie studios.
“Although we face challenging conditions, we continue to work hard to reposition and transform Blockbuster into a multi-channel brand that offers customers the most convenient access to media entertainment.”
The brick and mortar franchise has been pinched and bruised by various challengers of late, including Netflix and Zip, Coinstar and Redbox, which rents films for $1 a night from vending machines.
And let’s not forget that cable and satellite TV companies offer on-demand movie services, while Apple provides movies and TV programs online. As we have witnessed, Blockbuster has tried to provide these services with no real success.
According to Needham and Co. Analyst Charles Wolf:
“We got a dead-man-walking situation here…Blockbuster has only a few months left to make its stores profitable.”
How do you feel about this scenario? Can you imagine a world without as local video store? I personally don’t spend money on rentals, however Blockbuster is a far cheaper option for second hand movies and video games then any other store-bound locale.
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