Since DVD has replaced VHS tape, rental stores like Blockbuster have been losing ground. Image from Wikimedia Commons.

Blockbuster Video has filed for bankruptcy, as diminishing returns and mounting debt have put the company out of the reach of any loan modification. The company has been predicted to fail for years. Since the advent of Netflix and Redbox, people have been able to get the DVD of their choice faster, and for less instant cash for rentals. The video rental chain is losing ground in the U.S., but still does fairly well worldwide, but the international branches filed for the same protection as well.

Blockbuster wants to rewind on debt

The biggest reason for Blockbuster going bankrupt, besides losing a lot of revenue, is that the company has a lot of debt. The company is filing for bankruptcy, according to the Christian Science Monitor, to get a little debt relief. The company owes over $1 billion, and has not been able to keep up on the payments. Since there isn’t a loan lender that lends debt consolidation loans that big, the company has decided to restructure instead. Blockbuster Video will be trading shares for debts owed to creditors as part of the restructuring.

Losing ground

It has not been a secret that Blockbuster has been losing market share to Netflix, and also to Redbox. The selection that Netflix has to offer is gargantuan compared with Blockbuster. One of the complaints that has been lodged over time about Blockbuster and similar chains is that only popular movies are offered, instead of a wide and varied selection. Redbox doesn’t offer nearly the selection of Netflix, but is available in many locations and doesn’t require membership or having to drive too far.

Late fees canceled on debt payments

Blockbuster in the early 1990s was one of the largest video rental chains in the world. However, as pay per view and then DVD rental by mail became more prevalent, it started to lose ground. Blockbuster has tried to play catch up, but the company has yet to be able to regain lost ground.

Sources

Christian Science Monitor