Movie Gallery, which filed for bankruptcy in February plans to close its remaining video rental stores along with all of its Hollywood Video stores, leaving Blockbuster as the sole brick and mortar video rental store in America.
When Movie Gallery filed for Chapter 11 bankruptcy in February it was the second time it had filed for bankruptcy is just over two years. The movie rental company had planned to close more than half of its 2,415 U.S.-based stores and focus its financial recovery around a core group of about 500 U.S. stores; but the movie rental industry’s rapid transformation has prevented that from being a viable plan. And while Blockbuster, which has struggled with over $1 billion in debt, will definitely benefit from the demise of Movie Gallery, it is not clear that the store closings will keep the movie rental behemoth out of Chapter 11 bankruptcy.
Without Movie Gallery and Hollywood, Blockbuster has plenty of competition from on-demand services, kiosk operator Redbox and rent-by-mail leader Netflix, “but we have an opportunity to acquire those customers,” Blockbuster chief executive Jim Keyes said Monday.
Blockbuster has already warned that it may be forced to file Chapter 11 bankruptcy if they are unable to refinance over $1 billion in debt outside of bankruptcy. Also, the competition from nontraditional movie rental companies is stealing much of blockbuster’s business causing the company to slim down its own store holdings by closing 1,000 underperforming stores. According to some experts, Chapter 11 bankruptcy could be just what Blockbuster needs to give it the flexibility to restructure its business model in a way that will allow it to effectively compete in the new realities of the movie rental industry.