Once Goliath to Netlflix’s David, Blockbuster appears on the defensive in an effort to stay relevant to movie fans and viable as a business. In a filing with the U.S. Securities and Exchange Committee Monday, Blockbuster stated it may have to permanently close its retail stores. The company recently took out a $250 million loan—on top of its $780.9 million debt—and does not know if it can meet the conditions of the loan.
Blockbuster said it has “substantial doubt” about continuing as a “going concern.” A going concern is business jargon for the ability to continue as a functioning business that is not forced to liquidate its assets. The company operates 7400 stores globally, which spells bad news for Blockbuster employees and brick-and-mortar movie rental mavens.
Blockbuster did not fare well in a battle against DVD-by-mail powerhouse Netflix, mostly because it was late to join the innovative distribution method and invested too much time and money in other endeavors, such as a set-top box. Netflix has no retail store overhead expenses compared to Blockbuster which must keep the lights on at thousands of brick-and-mortar stores and pay retail staff.
Blockbuster is also facing competition from upstarts such as Redbox Automated Retail which operate self-serve DVD rental kiosks in retail locations such as grocery stores.
While many may be sad to lose the “convenience” of entering a Blockbuster store and choosing that night’s rental, more have chosen Netflix, one of few companies in this recession that posted a fourth-quarter profit, leading many to believe Netflix is recession-proof. From the looks of its numbers, and its own grim outlook on the situation, I’m betting Blockbuster closes sooner rather than later.
This story, "Blockbuster may shut retail stores" was originally published by PCWorld.