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Issue Date: Vol. 50, No. 10, October 2010, Posted On: 9/10/2010

Blockbuster Plans For Bankruptcy As Vending Dominates Movie-Rental Market

Emily Jed
Blockbuster, Coinstar, Redbox, Netflix, NCR Corp., kiosks, digital distribution, kiosk, vending, download movies, Internet-connected televisions, Viacom

DALLAS -- Blockbuster Inc. is expected to file for bankruptcy this month. The movie rental retail chain that once dominated the market has been struggling for the past several years as more consumers favor renting movies from kiosks, like Coinstar's Redboxes, or ordering them online from Netflix, over visiting its stores.

Sources close to the matter told the Los Angeles Times that executives from Blockbuster and its senior debt holders met recently with six major movie studios to discuss their intentions to enter a "pre-planned" bankruptcy in mid-September. 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 reportedly lost a total of $1.1 billion since the beginning of 2008 and closed nearly 1,000 stores in the last year alone. One of the primary goals of the bankruptcy process, which it expects would last about five months, would be to escape costly leases at least 500 of its worst performing stores, according to the newspaper.

Company executives reportedly told Hollywood studios that if Blockbuster successfully emerges from Chapter 11 protection, it hopes to grow through non-retail initiatives. One such example is its partnership with NCR Corp., which has already deployed about 6,000 Blockbuster-branded $1-a-night kiosks. The company also hopes to expand into the emerging digital distribution space, by allowing customers to download movies on computers, Internet-connected televisions and mobile phones.

Blockbuster's total market value is reportedly about $24 million. Its stock was delisted by the New York Stock Exchange last month because of its ongoing low price and moved to the over-the-counter market. In 1994, Blockbuster was acquired by former owner Viacom Inc. for $8.4 billion.

Hollywood Video, which was the second-largest DVD rental store after Blockbuster, went out of business in April.

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