Troubled video-rental chain Blockbuster Inc. filed for Chapter 11 bankruptcy protection today, and says it plans to keep stores and kiosks open as it reorganizes. The move, long expected and pre-arranged with bondholders, effectively ends an era that Blockbuster dominated—of Americans visiting video-store chains for the latest movie-rental releases. Increasingly, Americans are watching movies via video subscription services like Netflix Inc., video on demand and vending machine services such as Redbox. “After a careful and thorough analysis, we determined that the process announced today provides the optimal path for recapitalizing our balance sheet and positioning Blockbuster for the future as we continue to transform our business model to meet the evolving preferences of our customers,” says CEO Jim Keyes.
Blockbuster, founded in 1985 by a Dallas software entrepreneur, was once a home entertainment powerhouse. It helped popularize videotape recorders and took off in 1987 after Waste Management Inc. founder Wayne Huizenga took control and began aggressively expanding and buying up competitors. But Blockbuster has been losing money and market share for years. As Netflix, Redbox and other services gained popularity, Blockbuster tried to keep up. It ended late fees and started online and kiosk services of its own. But it was unable to keep its debt in check. Blockbuster says Thursday its 3,000 stores in the U.S., DVD vending kiosks, by-mail and digital businesses will all continue to operate normally. Operations outside the U.S. and domestic and international franchisees are not part of the Chapter 11 reorganization. The company has 12 locations in the Capital Region and recently started installing DVD vending kiosks in local convenience stores.
