Rumor is that movie rental chain Blockbuster Inc. may be heading to bankruptcy court. With almost $860 million in debt and high competition from rental kiosks, by-mail rentals, and online downloads, the one-time video rental giant has been losing profits left and right.
The company is taking several steps to try and stay in business, but filing for bankruptcy is not one of them, according Chief Executive Officer James Keys. In a recent interview Keys discounted the likelihood that the company will file for bankruptcy, saying instead the company plans to work with Hollywood studios to reduce DVD costs. Part of that plan includes creating consignment arrangements that would give movie studios a bigger share of the revenue while also lowering what Blockbuster pays.
Competition from vending machine kiosks like Redbox, as well as competition from by-mail or online video rentals from Netflix, Inc. has also taken a toll on the company. Keys is now in talks with several studios to make videos available for rent at Blockbuster Express (a video rental kiosk) the same day they go on sale. The company is also exploring the possibility of distributing movies through video on-demand services, which consumers could access through their cable, satellite, or telephone company.
For the fiscal year ending January 4, Blockbuster reported a net loss of $558.2 million, with sales dropping 20% to $4.06 billion. The company’s stock has also declined by 40% this year. Furthermore, after its sixth straight quarter of declining revenues, the company’s credit ranking was cut two grades by Moody’s Investor Services.
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