Blockbuster About to File Bankruptcy?
Blockbuster Video is having a tough year. Shares of the video rental giant have fallen 93% over the last year and their shares are now down to $0.22 / share after taking a 77% beating today in after hours trading after a report was published that Blockbuster is considering a bankruptcy filing. You can read the story on MarketWatch here.
I wrote about Blockbuster’s troubles earlier this year when my client received a letter from KPMG requesting rent relief in their San Jose property. Blockbuster’s business model is dead. Digital distribution is killing the brick and mortar movie rental business. Blockbuster only has performing stores in lower income areas where broadband penetration has not reached the same levels as it has in middle and upper-class neighborhoods. I can’t remember the last time I rented a movie from Blockbuster. Actually, you can buy movies from Circuit City right now for the same price Blockbuster charges to rent them. With the advent of movie downloads via iTunes, Netflix, cable companies and others sure to come, there is no need to leave your house to obtain digital entertainment. Most new TV’s are going to be “networked” and will be able to stream video content without the assistance of a separate computer.
Blockbuster prides itself in its large national footprint of over 7,500 stores but even if they are able to restructure and continue to operate a brick and mortar business, will they need 4,000 – 6,000 square feet? Doubtful. I think their stores are much larger than necessary even without the pressure from digital distribution. If Blockbuster is able to restructure through bankruptcy you will see several leases rejected but I really think this one is headed towards liquidation. The KPMG consultant told me they have a $250M credit facility coming due this summer. Looks like another big write-down is on the way.
Does anyone have a 6,000 square foot tenant looking for a freestanding pad in San Jose?
Related Posts:
- Movie Gallery to Close All 2,415 Stores
- Observation on Blockbuster Video Store Closure List
- Looming Retail Bankruptcies?