It has been expected for some time, but Blockbuster Inc. will finally file for bankruptcy at some point in September.
The Chapter 11 filing will allow the failing company to restructure its debt load of nearly $1 billion, working with creditors on repayment terms. The proceedings for the bankruptcy are expected to take five months.
One of the largest terms of the filing will be the closing of over five hundred of its locations with the worst track records, allowing it to do away with a large number of expenses in the form of leases.
Blockbuster has had greater and greater difficulties since the introduction of Netflix and, later, Redbox. Both newcomers have allowed customers to rent movies at lower prices and with greater convenience than traditional brick-and-mortar rental locations such as Blockbuster, by changing distribution methods: mail and streaming for Netflix, and unmanned vending machines for Redbox.
Competitor chain Movie Gallery, which also owns Hollywood Video, is currently in the process of shuttering its last remaining stores after filing for bankruptcy itself for the second time earlier this year.
The move comes despite significant cost cutting efforts already undertaken by Blockbuster, including closing hundreds of unprofitable stores in addition to those that will be closed after the bankruptcy. The company lost over $65 million in its first quarter this year.
The movie industry is eager to see Blockbuster somehow succeed in its restructuring efforts, as Netflix and Redbox have proven largely unpopular in Hollywood, their low prices and freedom afforded to consumers seen as cheapening the movie watching experience.
