Blockbuster has filed for bankruptcy, killed by its inability to successfully evolve with the times. Netflix and Redbox, on the other hand, can celebrate victory, one for the (relatively) little guys against a retail giant of old.
Blockbuster Goes Down
, Blockbuster has filed for chapter 11 bankruptcy protection. This has been coming for months as the company’s debts spiraled out of control over the last few years, ending at $1.46 billion on the day of the filing.
Most of that debt has been written off, with the bondholders being offered equity in the company instead. New cash of up to $125 million will be provided to ensure the company continues to operate and hopefully comes out the other side to face a new day and a new reality.
Netflix, Redbox Win Big
The reason for Blockbuster’s demise is clear: it couldn’t continues to compete when the world was starting to move away from bricks-and-mortar stores and physical media to online repositories of digital media. Or in the case of Redbox, unmanned kiosks.
Netflix is the main villain of the piece as far as Blockbuster is concerned, because Netflix is the company which provides the dual service – DVD rentals-by-mail and streaming content-on-demand – that made Blockbuster seem like an antiquity.
Netflix also stands to gain the most from Blockbuster’s demise, with people that have remained loyal to the chain now likely to weigh up their options in case their store suddenly vanishes. Cue new customers for Netflix, Redbox, and others.
The question left hanging is where Blockbuster goes from here. Should the company come out the other side then will it completely change strategy and try to compete with Netflix, Redbox, or both on an equal footing?
The problem the company faces is trying to start from scratch against established opposition, especially as it will be nursing a tarnished brand.
Conclusions
I’m not sure I can see a way back for Blockbuster from here. It will take a monumental effort, strong and decisive leadership, and some new plans that look to the future rather than the past.
