By  |  Monday, April 6, 2009 at 9:27 pm

blockbusterThe death knell may be ringing for Blockbuster. Today the video-rental giant admitted that if it cannot complete the financing deals that it is currently working on, there is a good chance the company may be forced to shut its doors. While the company last week said it was in the process of getting a $250 million revolving loan from creditors, that may be in jeopardy.

Why? The loan apparently has some conditions to it, and Blockbuster is now not sure it can meet them. Even worse, whether the loan goes through are not, it is not even sure that would be enough to save the company.

During my days at BetaNews, I always seemed to get the Netflix vs. Blockbuster stories and the pricing war and war of words that went on between the two. I can tell you from what I wrote during that period that Blockbuster’s financial problems stem from that fight.

Neither side was willing to lay off, and both put out lots of money to one up the other through promotions, advertising, and the like. Even more, the pricing war that went on between the two cut into each company’s revenues. While Netflix is still going, it too was bruised financially by the fight.

(It’s probably fair to say Netflix’s lack of overhead is why its wounds were less deep.)

I sure hope that Blockbuster can find a way out of this mess, but it could be a victim of the changing face of how we consume media just like the newspaper industry. I guess time will tell.



21 Comments For This Post

  1. Juan Carlo Says:

    I’m from Venezuela, and Blockbuster is the only movie rental service available in the country. If it does go belly-up, there will be no choice than to go illegal. And that simply breaks my fucking heart. Here’s praying against everything that this saves the company, because Netflix is nowhere near showing itself down here. God help them.

  2. cher lloyd Says:

    I just can't see how blockbuster and other static video rental shops can stay open in years to come. give it another 4 or 5 years and the idea of going to a shop to rent will be obselete

  3. pond Says:

    I never liked Blockbuster. But I’ll be sorry if it goes under.

    The new Netflix surcharges for Bluray access strike me as a stealth price increase; with the Post Office losing money and asking for higher rates, this will put more pressure on Netflix to raise its prices.

    The competition with (mainly) Blockbuster was keeping Netflix prices low. If Blockbuster dies, all us Netflix users might pay more, and more.

    Me no like that.

  4. E Says:

    I am praying Blockbuster shuts down! They are such a ripoff! It costs the same to rent a 10 year old movie as it does to rent a new release?! Come on people…this is why people are sprinting to Netflix, etc!

  5. GoodOlBoy Says:

    “… there is a good chance the company may be forced to shut its doors.”

    I am not sure that is what is actually said in the article.

    “Even if the loan is funded, the company said it “may not have sufficient liquidity to finance the ongoing obligations of our business, which raises substantial doubt about our ability to continue as a going concern.””

    I would think that means that it ends up re-orging or breaking up with with some group taking on the profitable store locations.

    And the real focus of Blockbuster’s problems is probably not so much NetFlix as
    – Bit Torrenting of movies
    – competition from Redbox for people who want to pick up a movie on impulse
    – people feeling burning by Blockbuster over the years and their changing strategies and fee structures.

  6. JDoors Says:

    I’m a Netflix devotee yet I hope Blockbuster pulls through in good shape. While Netflix develops and improves their business based on many factors, competition from BB is one of those factors and may be the only one that offers “nearly identical” services to NF. Knowing that customers who like this business model will no longer have a similar service to turn to could result in less responsive customer service from Netflix.

  7. Peter Says:

    Blockbuster may also be a victim of the internet. If movies can be delivered online, the overhead of Blockbuster will disable it from competing unless it shrinks and reinvents itself in minor specialty niches or follows Netflix.

  8. Sassmo Says:

    When I was a kid I lived in a small town of about 5,000 people. We had this video store that carried all the new releases, all of the cult classics, and a lot of the more obscure, hard to find stuff (many of which still aren’t available on Netflix). Then Blockbuster moved into town, less than a mile away and put that store out of business in less than 6 months. The only thing Blockbuster did better than that little store was carry a billion copies of new releases.

  9. urbandaddy Says:

    People still rent movies in stores? I stopped doing that when I sold my VHS player. Stick a fork in them, their done!

  10. trish Says:

    Here’s an odd, strange unusual thought – How about a LOCAL DVD store. Ya know the kind where people actually know their stuff. Crazy talk I know but….
    Here’s one:

  11. sal Says:

    Hey people, instead of complaining about the Business, whether or not you like Blockbuster as a company, let’s remember that it’s another huge company that employs literally thousands of people!! It’s not right to say “down with blockbuster”, if you don’t like it, walk on by…. it’s a big box world!!

  12. Jake Says:

    As a current employee at Blockbuster, I can tell you that things have been looking particularly bleak since the beginning of ’09. For the past year the company has been bending backwards, changing policies, experimenting, scratching, reaching for a foothold in the market that it just can’t seem to find.
    While I am no expert on the subject, I’m sure there are plenty of reasons for the store’s poor situation. Sure, Netflix and the Red Box are two prime competitors with their convenience and low prices, respectively, but they have their limitations. Many people are too impatient to wait for Netflix to send them their movies. Some people just like to watch something on a Friday night instead of waiting by their PO box. Red Box just doesn’t have enough of the new releases. If you don’t get there quick, you’re out of luck.
    I think a more likely culprit is the inability for Blockbuster to conform itself with the needs of the times. The average customer is (understandably) apprehensive when s/he has to pay 4.99 for a movie when it’s offered at a much lower price elsewhere. There is also (admittedly) a general lack of product knowledge on the employees’ part:
    1.) As part of the Film Familiarization program we can rent 5 movies per week but if we miss the 6-day “pre-street” period before a new feature’s release, we have to wait 3 weeks to rent it again. After that, few people care enough to ask about it anyway.
    2.) Video games have no “pre-street” time, and employees have to wait almost 2 months (8 weeks) after a release to rent 1 game per week.
    As ruthless as ANY corporation may seem to be (Blockbuster forced my favorite local rental store out of business a decade ago), 99% of its employees have no say in anything that goes on. While the event wouldn’t surprise me much, if the company goes under thousands of college students (like me), parents, and other people who have endured the numerous hour cuts of late will be forced into unemployment.
    If Blockbuster shuts its doors I guess it can be written off as a sign of the times. I really hope it pulls through if only for my fellow workers but I’m already looking for another job in the meantime.

  13. Thomas Says:

    It always amazes me to read posts from people that want Blockbuster to go out of business. What kind of person would want so many people to be unemployed?

    And FYI, the average consumer, i.e., someone who doesn’t own every device possible and just wants to watch a movie, still prefers to rent at a brick-and-mortar video store.

  14. Michael Says:

    Blockbuster and the way of the dinosaur: Evolution happens…sometimes winter last too long…adapt or die.


    Parkville, MO>

  15. MARTIN Says:

    I used blockbuster online for many years until they changed thier in store exchange policy last month.You used to be able to take the movies you recieved in the mail back to the store and exchange them for in store movies and the clerk would scan your returnables which would automatically send your next movies which were in your queue.Now they have set up where as you have to bring back the in store movies you just got from them before they ship your movies in your queue.Slows down the shipping almost in half.Better for blockbuster as far as mailing fees but not fotr the customer.

  16. Robert Says:

    I currently work at Blockbuster and this all sounds sooooo familiar to me. I worked at a small record store chain when Best Buys started popping up everywhere. At that time they were selling cd’s at less than my store’s cost. We simply couldn’t compete. All my customers were telling me about it every day. I told them all that what Best Buy was missing was service, and that if they put every small, service-oriented store out of business, the super prices would evaporate. Guess what? I WAS RIGHT! Now when I go into a Best Buy, I can’t find anyone who knows a thing about music (other than what is on his Ipod) and the prices are straight-up manufacturer’s suggested retail. This will happen at Netflix if Blockbuster goes under. Their level of service will fall off. They will change their prices at will to adjust their bottom line. The customer will suffer, and Netflix will not care. Why should they if they have no viable, legal competition?

  17. jason Says:

    goodbye i hate lackluster video customer service sucks and i werk at and indepedent video store that struggles partly because of them so why i would hate to see those ppl lose their jobs my video store will hopefully pick up the ppl who they lose by closing their stupid doors. good riddance

  18. Arthur Says:

    I currently own a small 1500 square foot video and game store and this is the first year we are losing money…Since we took over 3 1/2 years ago (we bought the 6000 sq ft building to open a tanning salon and the video store was part of the package for the building)… we always knew that the store would eventually lose money(with all the competition both from two other locals and the big ones) We will wait before pulling the plug after May 11,2009 and see what shakes out. About late fee…we charge $2.42 for one day and 3.42 for two days rental and old releases for 3 for 3 day for $3.00 and 6 for 6 for 6. If we do not charge late fees, we will never know when the DVD/Games will be back if at all and that’s not fair for the next customer, or for me…It’s call lost opportunity of revenue…someone has to pay for that. Being a small store I can not go out a buy 35 DVD of one time for one movie(I tried that with Pirates of the C and lost my shirt many of my customer went to Walmart and bought it. And that’s another thing I pay almost what Walmart is charging and there are other video stores who pay more because of there low volume. This is not a good business to be in. One thing that is being lost is the human connection, the store was a meeting place for our town and with that said, it is sad that it has gone away (actually it has moved over to the tanning salon side of the store…which is all one store with two different sides.) And for the record “I HATE LATE FEES, TOO” BUT A NECESSARY EVIL!

  19. Jon Says:

    I own a small video rental store in VA and we are staying busy. I am 28 and owmed or partnered in some kind of a business since I was in my teens. The one thing that no one gets is this…..CUSTOMER SERVICE & DISCOUNTS. Yes I charge late fees but I work with my customers unlike Blockbuster why, because S%*^T HAPPENS. If I help my customers they help me by still coming in and word of mouth, the number 1 advertising in the world. I am at my store 99.9 % of the time. I am open 7 days a week from 10:00 till 10:00 except Sunday when I open from 2:00 till 10:00. I work everyday except for Tuesday and Wednesday afternoon and Sunday. I have family that works for me because they know what I have up for the store. Also I don’t have to worry about money. movies, or anything else going on in the store. So yes I would hate to see Blockbuster close on a personal note. But on a business note….. let the B*$%H FALL, they have been around and made so much, let us little guys that built this country make some money for our families now.

  20. C Says:

    Everyone is making a big fuss about the possiblitiy of Blockbuster closing thier doors. Why? Its not like there aren’t other video stores out there. Hollywood Video, Movie Galary. There doors are still open with nothing in the future of closing. Plus depending on what state you live in their prices are alot cheapier. Michigan in some cities like Sagianw, the prices are 3.79 for 5 nights on new realeses adn 2.49 for 5 days on the older films. Plus they dont charge per day they are late. Its the same price 3.79 for new and 2.49 for old and you get to keep them for another 5 days. get over it.

  21. Kennesawga Garage Door Says:

    I cannot wait to read simple things more of this good topic. So much of it Ive never even considered. You sure did put an alternative twist on something that Ive heard a lot of about. I dont believe Ive actually read most things that does this subject as good justice as you only just did.

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