As it fights for survival, video-rental chain Blockbuster is preparing to file bankruptcy next month, according to a report in the Los Angeles Times.
Blockbuster executives met with the six largest Hollywood film studios recently to brief them about the company's plan, the Times reported. The move by Blockbuster, which closed down nearly 1,000 retail stores in the past year, appears designed to help the company get out of leases on perhaps as many as 800 underperforming stores, according to the report. The chain operates more than 3,400 stores.
Blockbuster reportedly plans to file something called a "pre-planned bankruptcy" and will continue to pay the studios and other most other major creditors. This development shouldn't surprise anyone. For years, Blockbuster has closed stores, laid off thousands, and generally been tumbling towards extinction. Driving to a video store to rent a movie is rapidly becoming as unnecessary as hiring a travel agent, developing film, or listening to music on compact discs.
A Blockbuster spokesperson was not immediately available for comment.
Mainstream consumers have opted for renting movies via rental kiosks such as Redbox, cable's video-on-demand, and especially Internet rental services--most specifically Netflix. Since 2008, the once industry-dominant Blockbuster has lost more than a $1 billion and Netflix has thrived.
The Los Gatos, Calif.-based Netflix will likely top 20 million subscribers next year and last year generated $115 million in net profit on $1.6 billion in revenue. Where once Netflix, with it's original business model of mailing little red DVD packages to customers, was a sort of a rogue element in the film distribution business, the public company has now won respect in Hollywood.
Netflix was once a source of far less revenue than Blockbuster or rival Movie Gallery, the No. 2 brick-and-mortar chain that has also filed for bankruptcy, but Netflix's CEO Reed Hastings was pesky in his ability to compete for customers. (The studios even tried to block Netflix from obtaining specific titles but the scrappy company always managed to find a backdoor way to get them.)
Now, Netflix's streaming video service is attracting the kind of audience and generating the kind of cash that's made film execs take notice.
This month, Netflix penned a five-year deal worth nearly $1 billion to stream movies from Paramount, Lionsgate, and MGM.
And digital distribution of movies and TV shows is barely in its infancy. Services such as Hulu, YouTube, and Boxee are still developing. Apple is reportedly working on some kind of new digital-video service perhaps tied to a new generation of Apple TV.
While we still have a long way to go, it doesn't look like brick-and-mortar video stores will be making the trip.