Blockbusted: Blockbuster Files for Chapter 11 Bankruptcy Protection

Blockbuster has filed Chapter 11. This is barely news, because we have all been seeing this coming for a couple of years. The reasons for the bankruptcy are fairly obvious: debt, outdated business model, alienated customers, constantly shifting pricing structures, unpredictable rental policy changes, tainted brand, etc. The question should not be, "Why did Blockbuster go Chapter 11?" but "How did Blockbuster stay out of Chapter 11 for so long?"

Now, what does all of this mean for you? If you are a common shareholder, you are probably about to get screwed and lose your investment. If you are a customer, things are less certain. Chapter 11 is a reorganization status. Blockbuster is not shutting down at the moment, but the company is likely to spend the coming months trying to restructure their organization into a profitable business. Look for a lot of store closings, changes in policies, changes in pricing, changes in store inventory, and changes in ways of doing business. (Wow! That sounds like business as usual for Blockbuster.) Maybe these changes will benefit the customers. Maybe the changes will be a big headache for customers. The good news is that you have choices. If Blockbuster changes in ways you do not like, just go somewhere else.

This Chapter 11 filing gives Blockbuster one last chance to get things right. If Blockbuster can take advantage of this opportunity, they might be able to figure out a way to please customers while being profitable. If Blockbuster cannot figure out how to rehabilitate their business model, then the eventual end of Blockbuster in inevitable. We will just have to wait and see.