Thursday, 23 September 2010

Blockbuster files for bankruptcy



1. Law A debtor that, upon voluntary petition or one invoked by the debtor's creditors, is judged legally insolvent. The debtor's remaining property is then administered for the creditors or is distributed among them.
a. Having been legally declared financially insolvent.
b. Financially ruined; impoverished.
Noun: bankruptcy

To go into administration:
When a company goes into administration it means their creditors can now get in touch and lay a claim to the money they are owed. The administrators will work out how much money is left in the company from sales of all its assets, and then pay off its creditors.

Chapter 11:

Chapter 11 is a chapter the United States Bankruptcy Code. It controls the reorganization of a business that is no longer viable in terms of paying creditors with its current financial burden. When a business finds that it is in trouble and no longer able to pay its creditors or maintain its debts, it can file with a bankruptcy court for protection under Chapter 11. A Chapter 11 filing means that the business intends to continue trading while the bankruptcy court supervises the company's debt and contractual obligations. The court has the power to cancel all or some of the company's debts. With this financial relief, the company has the chance to make a fresh start.

 Blockbuster files for bankruptcy

Sep 23rd 2010, by The Economist online

IN THE early days of the commercial internet, it was often predicted that pure e-commerce sites would begin to struggle as bricks-and-mortar stores moved online. “Clicks-and-mortar” stores, which could reach consumers both on the internet and on the high street, were thought to be inherently superior. Surely Blockbuster would be able to crush Netflix, an online service that rents DVDs through the post? Surely Barnes & Noble, a bookseller, would easily see off Amazon?

As it turned out, they could not.

Shares in Barnes & Noble have slumped over the past few years as those of Amazon have soared. The British arm of Borders, another media retailer, went into administration last year. And on September 23rd Blockbuster filed for Chapter 11 bankruptcy protection in New York. The firm, once owned by Viacom, a giant media conglomerate, aims to reduce its debts by about $900m. It is likely to close some of its 3,000 American stores. (The company’s non-American operations and franchised outlets are not affected by the bankruptcy filing.)

The growth of Netflix, a company with a vastly superior website and an attractive subscription model, was hard on Blockbuster. On one side was Netflix. On the other was the decidedly low-tech Redbox, owned by Coinstar. Redbox rents films for one dollar a night through kiosks in drug and grocery stores—a 1950s technology applied successfully to a new medium.

Netflix is a long-tail company. Its vast selection of DVDs means consumers with rarefied tastes can indulge their taste for Satyajit Ray films and Italian comedies. The firm is promoting the online streaming of older films, which subscribers will increasingly be able to obtain through internet-connected television sets. Redbox, in contrast, focuses on big films and recently-released DVDs.

Although the film studios greatly prefer to sell DVDs than rent them, they would rather rent through Blockbuster than through Netflix or Redbox. Warner Bros estimated in December that it makes $1.45 when a film is rented from a bricks-and-mortar store. It makes $1.25 from a subscription rental, and just one dollar when a film is rented from a kiosk. And Blockbuster sells DVDs as well as renting them.

Blockbuster thus faces a “clicks” competitor that offers an enormous selection of films and a “mortar” competitor that specialises in hits. Life in between is tough.


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