Blockbuster files for bankruptcy

by Adam Russett on September 23, 2010

Blockbuster, the company known for movie and game rentals, announced today that it filed for Chapter 11 bankruptcy protection, citing approximately $1 billion in debt.

Customers who are accustomed to the company's online services and physical stores should not be affected with the filing, since those operations will remain intact. The company said all of its 3,000 stores in the U.S. would remain open.

According to the company's press release, the filing will help reduce the $1 billion debt to an estimated $100 million. A Los Angeles Times report, revealed the company's total debt was $1.465 billion and that its assets were just over $1 billion.

Jim Keyes, chairman and CEO for the company, released a statement that said the bankruptcy filing will provide the company with "the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers."

Keyes added that the company secured $125 million in new "debtor-in-possession" from Senior Noteholders and called the financing "an important vote of confidence in Blockbuster."

However, some analysts have questioned what this move may spell out for Blockbuster's future in the home video industry.

Other services such as Video OnDemand, Redbox (a vending-machine service that allows users to rent movies for $1 a day) and Netflix may have taken away some business from the former giant in home video rentals.

Netflix has further extended its reach by making a portion of its library available immediately through a new function that allows customers to watch the films on demand through Sony's Playstation 3 and Nintendo's Wii gaming consoles. Many customers were drawn in by the absence of late fees.

Blockbuster combated this by offering a similar service of their own, allowing customers to rent films online. 

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