RSSThe clock ticks down for Blockbuster: 35 days and counting
By Tim Conneally | Published April 7, 2009, 9:14 AM
Blockbuster's recent filing with the US Securities and Exchange commission clearly portrays the gravity of the company's current situation.
For the company to maintain day-to-day operations, Blockbuster is in the process of refinancing its revolving and term loans, which will earn it $250 million that will come due in September 2010. However, before the refinancing can finish on May 11, certain conditions must be met before its lenders to fund the credit facility, and even if those are met, Blockbuster still may not make it.
In the 10-K filing, the company wrote [emphasis ours]: "The risk that we may not successfully complete this refinancing and obtain the related amendment of certain financial covenants included therein, and/or the risk that we may not have adequate liquidity to fund our operations as a result of not meeting our projected financial results, even if the refinancing is completed within the time and upon the terms contemplated, raise substantial doubt about our ability to continue as a going concern."
The Public's doubt was never as substantial as it was early last month, when Blockbuster hired Kirkland and Ellis LLP, notable bankruptcy lawyers who were also dealing with Charter Communications' Chapter 11 filing. When that news broke, it was a only a matter of hours before Blockbuster's stock tanked and investors began their proverbial deathwatch.
Contained within the SEC document, Blockbuster reveals that its 2008 cost control measures involved closing 6.8% of its corporate stores worldwide -- about 545 locations. Furthermore, the Blockbuster Total Access by-mail DVD rental business lost 26% of its subscribers, and the gross margin for merchandise sold in its stores dropped from 27.3% to 18.2%.
The margin on DVDs decreased "due to more competitive consumer pricing," and the company expects that to only continue shrinking. Likewise, the company decreased its overall inventory by $98.8 million.
"Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. This, to some extent, is subject to general economic, financial, competitive, industry and other factors that are beyond our control," reads Blockbuster's filing this morning. "We cannot assure you that our future cash flow will be sufficient to meet our obligations and commitments."
I've been waiting for this turd to die. I hate Blockbuster with a passion.
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|It's all cyclical. Everyone hated being out in the weather to shop. So Malls were chic. Everyone hated being cooped up in a mall, so sidewalk stores are now chic.
Mom and Pop stores ruled the roost. The corporate giants came in and put them out of business. Then the mail order rentals became king.
When that grows weary in the fickle minded public, the Mom and Pops will be back. Just like Bell-bottoms.
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|Can you say Redbox!
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|They're not angels but it would be sad to see Blockbuster go. Mostly because then, Netflix will jack their prices up and there won't really be any competition. If those rent dvd for 1 dollar a night machines can be successful at Wal-marts and grocery stores then Blockbuster simply needs to work on whatever they're doing that's bloated them up so much. Maybe close some stores or cut down on staff, I really don't know. But if Hollywood Video can survive when all they're doing is rending DVDs out for 3 or 4 dollars per DVD then whatever BB has done to get into this mess has got to be remediable.
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|We put our account on hold for a few months, both me and my wife are out of work. Also, just told her please stop adding to the que after reading this article.. She's not to happy about this considering we only paid 3.95 for 2 movies a month. Try watching more than that with a toddler age 2 and a 4 month old. The boys keep us busy, mater of fact the smallest is trying to erase what I'm typing now. Thanks Ethan.
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|the blockbuster in my town closed down last week. the store near my job is closing next week.
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|Good riddance to this overpriced anachronism.
When they shafted the online subscribers by jacking the fees and offering less that was the end as far as I was concerned and dropped them. Netflix knows what works and does it well.
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|That monthly fee ($9) is less than the cost of 3 rentals. Before Blockbuster lowered their prices, the fee was around than the cost of 2 rentals. Plus, you save gas. Blockbuster is dead. Blockbuster by-mail could have succeeded if they tried harder to compete, but it is too late for that now. If you don't like paying a monthly fee, there are more movies free on Hulu than in any Blockbuster store.
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|There has to be at least some sympathy for them since they are the only true rental store left in alot of places. What, you then are left with paying a monthly fee or renting downloads from Amazon.
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|OK plain n simple BB has made some well less than optimal business decisions, but BB was the defacto Video n Game rental chain; why because Mom n Pop couldn't compete. Now BB hasn't been out front leading the pack like Netflix, Amazon, Redbox, etc. they've been following the leader which isn't the thing to do in a forward thinking environment. Why o why BB couldn't have just seen far enough forward to take the bold and innovative steps that left them behind all the afore mentioned. Well yes now it's blowing up in their face and while I am a loyal Total Access member, I cannot see how they missed so many boats on their home turf.
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|Oh wait! But they have Blu-Ray titles!
:-O
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|Yeah, they have Blu-Ray titles. One or two copies per new release and they are never in unless you camp the store on Tuesdays.
That's the other thing, when does a new release become a non-new release? Is it 6 weeks, 6 months or 6 years? More than likely when it's rental numbers drop below a certain level. Maybe they should come up with a "Not So New Release" section and charge half price.
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|Bye....
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|Haven't been in one in a decade. I only went to a Hollywood once to see about getting some games for my PS2 for a long "recluse" vacation, but that was like 4-5 years ago. None of the games I got held my interest much.
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|You are 100% TomeOne, that is the reason we paid so much.
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|They priced themselves right out of business. When the price of a rental approaches the cost of a purchase the average consumer will opt for the purchase.
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|Yep, its as simple as that. In my area some of the mom n' pop places are doing OK because their cheaper and easier for kids to frequent. The local Blockbuster is right on the busy mall strip, surrounded by their biggest competition. The only thing that could save them is if they merged with somebody who compliments their business and then cut prices. Blockbuster-Gamestop, perhaps? Or maybe a they could have stores inside of movie houses like Regal Cinemas. The theaters are supposedly hurting as well - seems like a logical pairing.
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|No sympathy for the company that killed mom & pop video stores.
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