As pretty much everyone had been expecting, the struggling Blockbuster movie rental empire filed bankruptcy Thursday. But it won’t be shuttering its 3,000-odd remaining stores — well, not yet.
Nope, your local Blockbuster outlet will stay open for the time being, as the once-mighty video chain looks to shed a crushing debt of about $1.46 billion through a restructuring deal that’ll leave most of its creditors — including several of the biggest Hollywood movie studios — high and dry, according to Bloomberg.
The deal also involves a $125 million loan to help keep its stores running.
Blockbuster’s bankruptcy filing Thursday was hardly a shock. The Los Angeles Times predicted it late last month, and rumors of impending bankruptcy for the onetime video rental giant have been floating around for a few years now.
Though studios like 20th Century Fox, Warner Home Video and Sony Pictures will get stiffed as a result of Blockbuster’s bankruptcy filing, Hollywood execs have an interest in keeping Blockbuster afloat: Namely, they don’t want Netflix to get too high and mighty now that Blockbuster is on the ropes.
Indeed, it’s hard not to see Netflix as the big winner in the home video rental market. It came out on top after a bruising price war with Blockbuster in the mid-aughts, when Blockbuster challenged Netflix on its own turf with by-mail DVD subscriptions that included in-store rental trade-ins.
It was a killer idea — a little too killer, as it turned out. Blockbuster eventually opted to raise online subscription fees and curtail in-store DVD exchange privileges after customers took serious advantage of the service, resulting in bare “New Releases” shelves and a sea of red ink on Blockbuster’s books.
What’s the plan for Blockbuster now? Well, the chain still has its Blockbuster On Demand streaming service to lean on, as well as its growing fleet of NCR-operated Blockbuster Express kiosks — although as Inside Redbox reported last week, it’s starting to look like Blockbuster might fall short of its goal of 10,000 kiosks by the end of the year. DVD Kiosk competitor Redbox, meanwhile, has about 25,000 kiosks in the U.S., and counting.
In any case (and as I’ve written before), this is no time to be gloating about Blockbuster’s ill fortune. While I’m no great fan of Blockbuster (I tossed my membership card more than a decade ago), competition is good. And in the interest of keeping the big guys — namely Netflix and Redbox — honest, I’d like to see as many players in the DVD rental game as possible.
Then again, there’s an old “Wall Street” quote that keeps ringing in my ears when it comes to the debt-ridden Blockbuster’s predicament: “Sheep get slaughtered.” Harsh, Mr. Gekko, but true.
— Ben Patterson is a technology writer for Yahoo! News.