Bankruptcy Paves The Way For Blockbuster's New Strategy

In its heyday Blockbuster was an undisputed powerhouse in the movie rental industry.  But as the movie rental industry rapidly changed, Blockbuster failed to quickly adapt and found itself on the brink of extinction.  But with the power of Chapter 11 bankruptcy, the once powerful movie rental company is getting a second chance to implement a strategy that will allow it to not only compete but dominate the movie rental market once again.  With over 3,000 stores scattered throughout the United States, Blockbuster is a household name, but because the movie rental industry has changed so much it is an undisputed fact that the video king will need to reign in its dynasty of retail locations if it wants to survive.

But how does Blockbuster do it without ruffling the feathers and lawyers of all those landlords with whom they’ve signed leases?  Chapter 11 bankruptcy will allow Blockbuster to break leases and other agreements if it will help to insure the survival of the company.  And in the case of Blockbuster, which is operating in an environment where the most successful movie rental companies use kiosks not stores, closing a significant chunk of those retail locations is essential to the survival of the company after bankruptcy.

According to the company’s projections, closing 145 stores before they filed bankruptcy has already saved Blockbuster an estimated $19 million.  It is reasonable to believe that a bankruptcy court would agree that continuing the policy of closing unprofitable stores is a winning strategy for the company’s Chapter 11 bankruptcy reorganization.