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Blockbuster busted – Chapter 11

DVD rental group BlockBuster have been hit hard by online film rental services and mail order dealers. The 25 year old company is filing for Chapter 11 bankruptcy protection in the US today.

Blockbuster have been in operation for 25 years now and they may very well reemerge after a restructuring deal was agreed with creditors who include the billionaire US investor Carl Ichan. Icahn is one of many bondholders who will swap debt for equity in a revamped company who could see loads being slashed from 900m dollars to a little more than 100 million dollars.

BlockBuster Illinois: Courtesy of Geddy Images

Blockbuster has been struggling for a while now with heavy debts and have also faced management problems in recent years. The issues have been made worse by a huge number of vending machines who rent films for a dollar a day. Additionally, they have not been helped by online services, many of which aren’t legal and offer movies for nothing via Bitorrent or newsgroups.

It has been an uphill battle and one they haven’t been able to win to this point. DVD sales are down 40% causing issues for Hollywood Studios. Analysts say that the whole industry could implode if sales continue to drop as more and more people get their entertainment for free online.

KitGuru says: Online technology has killed Blockbuster, but will they be able to bounce back? It doesn’t look good.

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