Blockbuster May Shut Retail Stores
Once Goliath to Netlflix's David, Blockbuster appears on the defensive in an effort to stay relevant to movie fans and viable as a business. In a filing with the U.S. Securities and Exchange Committee Monday, Blockbuster stated it may have to permanently close its retail stores. The company recently took out a $250 million loan -- on top of its $780.9 million debt -- and does not know if it can meet the conditions of the loan.
Blockbuster said it has "substantial doubt" about continuing as a "going concern." A going concern is business jargon for the ability to continue as a functioning business that is not forced to liquidate its assets. The company operates 7400 stores globally, which spells bad news for Blockbuster employees and brick-and-mortar movie rental mavens.
Blockbuster did not fare well in a battle against DVD-by-mail powerhouse Netflix, mostly because it was late to join the innovative distribution method and invested too much time and money in other endeavors, such as a set-top box. Netflix has no retail store overhead expenses compared to Blockbuster which must keep the lights on at thousands of brick-and-mortar stores and pay retail staff.
Blockbuster is also facing competition from upstarts such as Redbox Automated Retail which operate self-serve DVD rental kiosks in retail locations such as grocery stores.
While many may be sad to lose the "convenience" of entering a Blockbuster store and choosing that night's rental, more have chosen Netflix, one of few companies in this recession that posted a Q4 profit, leading many to believe Netflix is recession-proof. From the looks of its numbers, and its own grim outlook on the situation, I'm betting Blockbuster closes sooner rather than later.