Report: Blockbuster To File For Bankruptcy Tomorrow Morning

About a month ago, we wrote about reports that Blockbuster Video would be filing for bankruptcy in mid-September. So it shouldn’t come as a huge surprise that Bloomberg News is reporting that the video chain will be making the filing official on Thursday morning.

According to Bloomberg:

Blockbuster Inc. is set to file for bankruptcy tomorrow in New York before the stock market opens, using a $125 million loan to reorganize so it can compete with rivals such as Netflix Inc. in renting movies online, according to a person with knowledge of the planned petition.

Billionaire investor Carl Icahn, who bought about one-third of Blockbuster’s bonds, will join with a group of creditors in swapping their debt for all of the video-rental company’s stock, according to the person and two others who declined to be identified because the discussions are private…

If creditors get all of Blockbuster’s stock, current shareholders will be wiped out.

The report says that Blockbuster, which quietly swapped CFOs a couple weekends ago will continue to focus on the handful of bricks and mortar stores that still make money, while using the rest of the loan to try to bolster its online streaming and DVDs by mail products.

Regardless, if you have an unused Blockbuster gift card sitting around, use it now. When a company enters into bankruptcy, gift card holders often get left out in the cold, so it’s best to use them while you still can.

Blockbuster Said to Plan Bankruptcy Tomorrow With Loan [Bloomberg]

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  1. Galius Persnickety says:

    Good riddance. Screw you, Blockbuster!

    • PunditGuy says:

      This is, unfortunately, reorganization instead of liquidation. In either case, shareholders get the shaft, while the well-compensated decision makers who orchestrated this mess continue to be well compensated.

      • NeverLetMeDown says:

        The CFO has been there for less than a month.

      • captadam says:

        Yes, it’s unfortunate that the company won’t cease to exist and that all employees won’t lose their jobs … what a shame.

        • AnonymousCoward says:

          Well, most of the employees will lose their jobs. It sounds like they’re going to close most of the retail stores, and use the loan money to prop up the online business for awhile.

        • Not a Fan Boy says:

          But with most of there brick and mortar stores closing the vast majority of their employees will be loosing jobs. Blockbuster gets to keep existing while screwing the little guy. This is hardly better then a chapter 7 from that perspective.

    • Fight Back Against David Horowitz! says:

      The writing has been on the wall for years. Any shareholders who were still holding on to Blockbuster stock hoping for the best?

    • MeowMaximus says:

      Yep, lousy customer service, poor selection, and failure to innovate – a recipe for failure. I hope Blockbuster dies, the way GM, Chrysler & AIG should have been allowed to.

      • consumer420 says:

        Yeah talk about a recipe for failure. I went to 2 different stores after reading this article to try to use my gift card. Both stores told me they couldn’t take credit/gift cards because it was raining. Even after the rain had stopped. Something about satellites. At least I was able to use the card online.

  2. mindshadow says:

    Does this mean if I go rent a bunch of stuff and don’t return it that they won’t care?

  3. Loias supports harsher punishments against corporations says:

    OMG, you use the old school skiing game icons. I love you!

    • DariusC says:

      Agreed! That game was awesome…. but that fucking monster would gobble me up almost every time! And then I think they had two of them when you avoided one enough times… wtf? Lol…

  4. humphrmi says:

    Before everyone jumps on the “good bye Blockbuster” bandwagon, just remember that they are reorganizing, that means they get to exchange their debts for equity in the *new* Blockbuster, wipe out their existing equity, and re-emerge as a still functioning company.

    • sir_eccles says:

      Lather rinse repeat

    • JJJJust says:

      Let’s also not forget that a vast number of companies never emerge from bankruptcy protection as a viable entity. (Think of it as corporate stillbirth, in a way.)

      • AnonymousCoward says:

        A while back I read an article that said that there were exactly zero companies that had been delisted from any of the major stock exchanges that had ever gotten solvent enough to be relisted. I imagine the odds of Blockbuster recovering from this in any meaningful way to be exactly zero.

        • sir_eccles says:

          I recall another article where British Airways was pissed that 99% of the US airline industry was operating under Chapter 11 while they had to be solvent all the time.

    • Fallom says:

      Let’s not forget that there’s no reason to believe that Blockbuster won’t continue to its unsustainable policy of reacting to competitors instead of innovating, and hemorrhaging money as a result of being the jack of all trades.

    • Awesome McAwesomeness says:

      They are still behind the times in innovation, and many people hate them. They are going in under a black cloud. Unless they come up with something other people don’t have, they are doomed.

    • mbz32190 says:

      Sorry, Hollywood Video/Movie Gallery /Circuit City /Linens ‘n Things all went through the same thing, and all closed in the end. Blockbuster is dead, B&M, or otherwise.

  5. joe23521 says:

    I actually thought their very first Total Access (or whatever the f it was called) program was a super good deal. I also knew that it wouldn’t last very long. They need to go back to that model to have any chance of surviving.

    • WhyNotTry says:

      In 2004, I paid a set price and was able to rent DVDs online and each month received 2 coupons for in store rental on a DVD or a video game. Was a loyal customer until Blockbuster cut it down to 1 coupon that could not be used in on video game. Oh, also, the price went up (from 8.99 to 12.99 – i think).
      I switched to Netflix which I still use today.

  6. chaesar says:

    who would give Blockbuster 125 million?

    • Loias supports harsher punishments against corporations says:

      Eccentric billionaires. Or, it’s from TARP funds.

      I kid, I kid.

    • AnonymousCoward says:

      It’s a bankruptcy loan. The bank giving the bankruptcy loan is the first to get repaid if the company is liquidated. And I believe, additionally, the bankruptcy loan has to be repaid before they exit bankruptcy. So they get repaid, even if nobody else does.

  7. vitajex says:

    Gift cards? Who would give a crap about gift cards when their investment in stock could be wiped out in one day?

    I guess, to be fair, most of the gift cards out there are worth more than a share…

  8. 420greg says:

    Why would be rent movies over the internet? That’s insane. No one will buy it.

  9. Jonesey says:

    When they finally go bankrupt—please post a picture of the blockbuster logo getting gobbled up by the SkiFree monster. That would be so bad ass.

  10. Dutchess says:

    Honestly, with a company the size of Blockbuster, what will a $125million dollar loan really get you?

    I suppose the BK will allow them to close a bunch of stores without having to pay early lease termination fees and walk away without any money owed. As far as $125 million, I can see they could blow through that pretty fast and see little improvement.

    I for one hope they survive in some form because competition is good. It will help keep Netflix’s prices low and make sure there is more than one player in the field.

    • Sbb says:

      There’s still Red Box giving Netflix a run for their money

    • kenj0418 says:

      “what will a $125million dollar loan really get you”

      Actually, I think it’s just Carl Icahn paying all the late fees on that copy of ET he checked out in 1983 and just now returned.

    • JohnnyP says:

      I wonder how many stores are actually owned by Blockbuster. All of the Blockbusters in my area (I think most of southwest VA) Closed a year or 2 ago. They were all owned by one company that franchised them.

  11. MFfan310 says:

    Hope they use the proceeds from the store closings (we already had one close in Fort Wayne) to improve their streaming media technology platform on the PC and other gadgets. WMV-DRM 10, with its constant buffering, bandwidth-eating, and lock-in to Windows and Internet Explorer, is so 2006 – time to move onto H.264 video in Silverlight wrappers (a la Netflix) or Flash wrappers for Blockbuster On Demand. For mobile devices, more apps a la the Droid X will work.

    Oh, and include (improved) Blockbuster On Demand in their DVD-by-mail service. No one wants to pay $3 for a one-time movie stream on top of the Blockbuster Online subscription when Netflix builds unlimited streaming right into the subscription.

  12. Awesome McAwesomeness says:

    Give it up Blockbuster. When part of your original business model was to put other stores out of business by opening up next door or across the street you deserve your demise. You are too late in the game and everyone hates you.

  13. CBenji says:

    I am almost ashamed to post this, as two years ago I got a Blockbuster account. I did the total access through the mail, dumped Netflix as it took them 2 days to get me a movie by DVD each way, and blockbuster 1, and blockbuster’s store was a mile away. Blockbuster also takes their movies back from the mail and exchanges them with a rental and Netflix’s streaming at the time couldn’t do Mac, well times have changed let me tell you.

    I got a Blu Ray player now, but I started with a Wii. Now with the Blu Ray player wowsa. I just put my Blockbuster account on hold, and I am going to dump their butts on Friday as they claim when they are on hold you don’t make a payment, but who knows. I can’t believe how much faster Netflix is. Wow, have they improved. Now with this Blu Ray thing I can also see what Block buster had to offer on streaming and I was affronted. They can kiss my butt. Although they store where I live will never close. They are always swamped, and their manager, and workers don’t deserve to lose their jobs, but there through the mail honestly sucks. If I could copy & paste my queue I would. I had ten movies in there and they were all long wait, or not available. What a disgrace. No wonder they are going bankrupt. They must have a hundred copies of Avatar at the store though.

    Tell me why they couldn’t have done streaming for .99 per movie or make deals like Netflix does? I find the business skills of this company a joke.

  14. ZukeZuke says:

    I don’t understand much of the cheerleading for them to go the way of the DoDo.

    I don’t want to see thousands of more people lose their jobs, and when Netflix becomes the only major player left standing, they’re going to jack their rates up for sure. Competition from Blockbuster and RedBox is the only thing keeping their prices in check right now.

    • CBenji says:

      ZukeZuke I agree with you. I don’t want them to go the way of the dodo. I want them to evolve, but well I don’t know if they will do that. They really do suck the way they are now. Their mail selections are terrible, and they don’t have many movies in their store either except tons of new selections. I do hope the people I have met get to keep their jobs in the eventual mom & pops that will turn into what becomes of their stores. How many of those can the world support?

    • quail says:

      The hate is there because everyone has had a belly full of Blockbuster’s hubris.

  15. Extractor says:

    If you have an account with Blockbuster, are you better off cancelling tonight?

    • CBenji says:

      I just put the stupid DVD’s in the mail & I would feel like a thief if they don’t get them. I know I am a nerd. My account is not supposed to be charged till the 25th which I think usually means the 26th.

    • Danjalier says:

      If you cancel tonight, it is your cancellation that will doom the company. I don’t care that chapter 11 bankruptcy means they might survive in the end. Minutes after they make the announcement, they’ll say “F*** this. Someone just cancelled their membership last night. We are just .0001% short of our necessary membership level to have a fighting chance. Pack it up. We’re dissolving.”

      YOU killed Blockbuster DrRonster. YOU.

  16. Fafaflunkie Plays His World's Smallest Violin For You says:

    How coincidental! As Blockbuster heads for Chapter 11, Netflix officially finds their way to Canada! For $7.99/month we get unlimited streaming of whatever they’ve got. No mailing DVDs though, they’re not doing that up here. Nevermind the fact they had to hire extras to hype up their launch party, that’s beside the point. We’ve got Netflix now! Huzzah! Time to see if my Bluray player will get a firmware update to stream to my TV!

    • seanjustinpenn says:

      It’s of unlimited streaming of “whatever they got”. They “got” a lot more, but they’re only allowing Canadians to see a small percentage. Americans get to see a lot more movies/shows.

    • seanjustinpenn says:

      It’s of unlimited streaming of “whatever they got”. They “got” a lot more, but they’re only allowing Canadians to see a small percentage. Americans get to see a lot more movies/shows.

  17. TheSpatulaOfLove says:

    I’m not shedding a tear here… I pass by 3 Blockbusters to get to Family Video, as they have been great to me. The only time I had a problem with FV was when they didn’t have the original Star Wars, because the previous renter destroyed it and they hadn’t received their replacement copy yet. Oh boo hoo for me…

    On top of it, FV is cheaper than BB by a long shot. BB charged me $5 to rent Star Wars – FV would have been a buck.

    Redbox is okay – I find the selection to be mediocre, and despise waiting in a line of mouthbreathers who can’t figure out what movie to watch, yet hold up everyone else while they try to decide IN FRONT OF THE SCREEN.

    Netflix is on my radar…I’ll delve into that when I get the Boxee boxes up and running. (My personal goal for winter).

    • valkyrievf2x says:

      NEver understood that. It seemed like a lot of the mom and pop video stores were a LOT cheaper than BB. The one we used to have in Lebanon, TN (still there, we just moved), was $1 for 5 nights for the non-new release. New releases were 2.99 for 2 nights. We couldn’t even get an old movie for under 2.99 at BB. There were some .99 movies, but usually mostly crap. Here in our new area in GA, there are a couple of BB’s and nothing else. They are charging almost $5 for the older movies. Seriously?? Yeah, Redbox might have less selection, but for that price, im sure i can dig up a few movies to check out…

  18. zantafio says:

    and Netflix shares went up 6.61% today! And a whooping 41% since June 1st.

  19. Gilcole says:

    DIIIIE BLOCKBUSTERS!!!

  20. mandy_Reeves says:

    Meh…I worked for them for 2 years…had to quit due to a thieving manager and a horn dog sexist perv manager. Before that though…it was good times! Every year for Christmas the employees would get a free DVD of the top renting movie of November or December…I can’t remember the criteria…ANyhoo…First year there, we got Bruce ALmighty and year after that Elf or was it American Pie Wedding…It even had a snow globe recreating the scene where Jason Biggs character heaves his pubes out the window…

    • CBenji says:

      wow, I thought I was the only one who ever had to work with a sexist perv manager. LOL I guess that testosterone is strong stuff, huh?

  21. dvdchris says:

    Que all the Consumerist commenters that can’t RTFA with their ‘good riddance’ nonsense.
    Blockbuster is not going away. Yes, many stores will close that are in bad locations and lease agreements, but the market was oversaturated with stores anyway.
    Sony pictures just joined the group of studios whose hit films you can only rent at Blockbuster during the first month of release. Now fully half of all major hits that are released CAN ONLY BE RENTED AT BLOCKBUSTER DURING THE FIRST MONTH OF RELEASE.
    Where are your Netflix and Redbox gods now?

    • drburk says:

      renting from Blockbuster to fill their orders..

    • quail says:

      Blockbuster will exist in some form or another. That’s a given. The hate you’re seeing vented is from people who’ve seen the company mess over the customer or who’ve seen their beloved store from the 1980s slowly de-evolve (DEVO) into a technologically backwards company.

      And really, that agreement the studios have with Blockbuster only keeps the movie out of the hands of other rental distribution streams for a month. Big deal. Netflix & my library have an awesome collection of classic, foreign, and art films to keep me busy until they do carry the Hollywood hit I’m waiting to watch.

    • RandomHookup says:

      I expect they will make a pretty good run on the kiosk business, though they could end up selling that piece to Redbox. There will still be demand for cheap & on-the-spot movie rentals and if they can get latest releases before Redbox (and get rid of the crap movies at the bottom of the machine), they might be around until streaming totally kills off that business (probably take longer than we expect — people predicted the death of video stores years ago and it hasn’t happened completely).

    • Marko_Vulvic says:

      Sony pictures just joined the group of studios whose hit films you can only rent at Blockbuster during the first month of release….

      Or get in DVD quality the day 99% of movies come out online. And keep forever. With no DRM. In multiple resolutions, languages, and subtitles.

      Its not just that going P2P is cheaper…it’s BETTER. How can they possibly compete with cheaper, easier and better?

    • Sajanas says:

      If Blockbuster dies, the companies will still want to keep new releases from Netflix and Redbox, since they care about volume of DVD sales (and I believe that the waiting period also involves a discount for Netflix and Redbox, and more streaming titles). So it was a bit of a kick in the teeth for the studios to go offer Blockbuster the new releases, I find it hard to believe that people who have over 100 things on their queue are distraught that they can’t get Avatar when it first comes out. The only thing I hated was when they would get the movie and it would be on Very Long Wait for 4 or 5 months afterwards.

  22. Bunkka says:

    Good point, and I would have to agree with you there.

  23. CyGuy says:
  24. human_shield says:

    Blockbuster needs to streamline its business model to become profitable again. Redbox might have a few new releases, but zero old movies. So unless I want to wait a couple of days for Netflix to mail me one, I have to go to Blockbuster. All the other video stores are out of business.

    They could shrink their store, install a row of kiosks instead of aisles and aisles of DVD boxes, boost their inventory, have a couple employees managing and helping customers.

  25. vioviovioletta says:

    I work at Blockbuster now, but I just had a job interview on Tuesday and I have a peer interview on Friday, so hopefully I’ll have a new job soon.

  26. FeelinFroggy says:

    Amazing how a company that charged $5 to rent a movie is in this situation….

  27. HogwartsProfessor says:

    I kind of hope the one near me doesn’t close, because it’s convenient. There is Family Video also, so I may just go ahead and get set up there. Although I’ve mostly been using Netflix, I still like to go to the movie store from time to time and browse for a film. Or grab a DVD I’d like to see right away.

  28. Robofish says:

    At least my mail subscription is still good. PHEW! Now how about working on mailing out games on Day 1 instead of making me wait 100 days for a new release. Still, cheaper then gamefly though