What's next for Blockbuster?

Now that the video giant has filed for bankruptcy, will it emerge a stronger company or fall into oblivion?

By TheStreet Staff Sep 23, 2010 12:56PM

thestreetBy Jeanine Poggi, TheStreet


Now that Blockbuster (BLOKA) has finally filed for bankruptcy, what will become of the video giant?


Blockbuster said business will go on as usual as it whips out its $900 million in debt. This means that Blockbuster's 3,000 stores and kiosks and its by-mail and digital business will all continue to serve customers.


More than 80% of the company's senior note holders have agreed to support the plan and provide $125 million in debtor-in-possession financing to help support Blockbuster's operations while it undergoes the restructure. Under the Chapter 11, bonds will be converted into equity.


While Blockbuster did not reveal a time frame for the restructure, CEO Jim Keyes said the bankruptcy will allow Blockbuster to reemerge as a company better capable of taking on the evolving video market and growing its digital presence.

Still, Keyes did note that the company will evaluate its entire portfolio of stores. This year Blockbuster has already shuttered 1,000 stores, and reports have surfaced that 500 to 800 more closures are possible.


Blockbuster has been questioned from as far back as 1999, when Amazon (AMZN) and Netflix (NFLX) entered the market, about the future of brick-and-mortar stores.


In an interview with TheStreet earlier in the year, Keyes said he could "never say never" when it comes to completely shedding stores.


Then, of course, there is always the worst-case scenario. Blockbuster could follow the same path as now-defunct Movie Gallery, owner of Hollywood Video.


After struggling with the same issues as Blockbuster -- losing market share to digital technology -- Movie Gallery was forced into a Chapter 11 filing in February. At the time, Movie Gallery also said it would continue to operate while in bankruptcy, vowing to pay employee salaries and benefits, honor customer gift cards and store credits and pay vendors.


Then, two months later, on April 30, Movie Gallery announced it was closing and liquidating all of its stores under a Chapter 7 bankruptcy filing.


While Blockbuster may have more staying power than Hollywood Video, the worst-case scenario remains possible.


What do you think? Will Blockbuster emerge a stronger company or fall into oblivion? Take our poll at TheStreet.


Related Articles

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.