Why did Blockbuster Fail in US? Why They Filed for Bankruptcy?

Renting a movie from blockbuster was an experience that everyone looked forward to in the beginning, and the DVDs that you could receive in the mail suddenly turned into an obituary. Blockbuster provides home video games and movies to someone who would rather watch that “to die for” movie in the comfort of their own home. Beginning its years in the 80s, blockbuster seemed to be very successful.

Lee Dean, whom created the blockbuster logo, was able to peer into neighborhoods and customize their stores to specific demographics. Not to mention, popular releases and the size of their collections were also taken into consideration. In 1987, they found themselves taking over the market of Nintendo after they won a court case against them.

In 1992 when Sound Warehouse and Music Plus retail chains were bound by Blockbuster, they were able to form blockbuster music. After merging with Viacom in 1993, they found their stock investments going downhill and Viacom found it fitting to just buyout Blockbuster for over $8 billion. While this was taking place, Blockbuster was growing and expanding in the United Kingdom.

Over a period of time, it became one of the largest rental chains in the U.K. In 2004, Blockbuster found the strength to separate from Viacom and game and movie renting at home was introduced. Blockbuster incurred a $1 billion debt load that they were given until August to pay off. Yet, even before then they continued to show signs of continuous drops in revenue.

While Blockbuster seemed to making its mark all over the world, September 23, 2010, they decided to file bankruptcy because they had already reached $900 million in debt. Not to mention, their competitors such as Redbox, Netflix and Video on Demand was bringing some strong competition to the table. However, Movie Gallery/Hollywood Video had gone through the same situation a little earlier in the year.

Blockbuster still trying to hold on to at least a little over 3,000 of their stores, were still expecting to close at least 900 of them before the year was out. Yet, they decided to close over 100 more to pull themselves out of bankruptcy. Even after all of this, the coming year seemed to be no better because Blockbuster found themselves selling more of the company for about $300 million more.

The Department of Justice filed a claim that stated Blockbuster does not have the money to continue their operation and should consider liquidating on March 1, 2011. Dish Network, taking over the remaining stores worked extremely hard to keep at least 600 of the stores opened and managed to succeed with a finalization on April 26, 2011 after they had won an auction to buy the stores for $320 million on April 6, 2011.

The sad truth is that even now in 2012, many of the unprofitable stores were shut down in February. Owners want to keep the Blockbuster chain going, but the way things are going, no one is sure if this is certain.