Don’t roll the credits for Blockbuster (Stock Ticker: BBI) just yet.
Despite filing for bankruptcy protection last week, the Netflix (Stock Quote: NFLX) and Redbox (Stock Quote: CSTR) nemesis has vowed to continue fighting the good fight.
According to Patty Sullivan, Blockbuster's senior director of corporate communications, the recapitalization of the company will have no bearing on its day-to-day operations, and customers debating whether to cancel their memberships should not. "There’s no need to, it’s business as usual," Sullivan says. "Customers can still get their movies in the store. This is just a legal proceeding to reduce our debt and it has no effect on our stores."
While this sounds promising, things certainly won’t be business as usual for Blockbuster, at least for its customers. Now that control of the company rests firmly in the hands of creditors and debt collectors, they’ll be looking for ways to squeeze money from the video rental giant. And as TheStreet previously reported, “The fastest way to do this would be to cherry-pick and close stores, Wedbush analyst Michael Pachter says. Pachter estimates Blockbuster could be as small as 1,000 stores when all is said and done, from its current portfolio of 3,000 locations and a peak of over 5,000 stores.”
Creditors will be even less inclined to keep the remaining stores open, presentable and clean. “[Blockbuster] will maintain its stores, they won’t go to zero,” Pachter recently explained to MainStreet. “But creditors will question why you need to clean so much. They’ll say, ‘why don’t you paint the walls every three months?’ It’s going to look dingy.”
The customer experience will likely suffer in other ways, Pachter said. The selection of movies and games will start to look a whole lot leaner, and creditors will be reluctant to sink more money into growing the business. “The selection will be a bit thinner in the next year or two,” Pachter said.