No more late fees as Blockbuster goes into administration
By Rebecca Burn-Callander Thursday, 17 January 2013
The UK arm of US film rental business Blockbuster has finally called in the administrators after a plunge in profits. It's the third high street casualty in less than a week.
Blockbuster. A place where teenagers would gather on Saturday afternoons to obstreperously debate the merits of Pulp Fiction or Twin Peaks. Even the name itself has a nostalgic thrill.
But if, like MT, your Blockbuster card is languishing unused at the back of your wallet, the news that the chain is in financial difficulties will come as little surprise.
Blockbusters first opened its doors in South London back in 1989 and became one of the most popular movie rental stores on the high street. But the years have not been kind. Despite outlasting rival chains like Prime Video and turning a profit while hundreds of independents went bust, the chain has finally met its match.
Blockbuster is no longer able to compete with the raft of online movie rivals, from Lovefilm to Blinkbox, Netflicks to iTunes. Back in 2010, the company posted a profit of £1.7m. By 2011, it was firmly in the red with a £8.4m loss.
At the end of last year, losses deepened again to £11.2m, the UK arm of Blockbusters’ debt to its US parent company, pay-TV business Dish Network, reached £23m and its owner decided it was time to push ‘eject’.
Not that you should destroy your Blockbuster card quite yet. Administrators Deloitte may yet find a buyer. There have already been three expressions of interest, the firm has revealed. Of course, these bidders are probably more interested in Blockbusters’ prime retail space than the business itself. Indeed, Tesco and Wm Morrisons are believed to be sniffing around Blockbusters’ lease agreements (it still has £90m in unexpired leases running) to see if the shops could be turned into convenience stores.
The tragedy for Blockbuster was that it failed to reach its £4.4m final quarter earnings target, which meant the chain couldn’t file for a company voluntary arrangement. This would have allowed it to exit loss-making stores only. ‘The company just reached the point of no return,’ says Lee Manning, joint administrator and partner at Deloitte. ‘After this it risked more and more asset erosion.’ Nevertheless, Manning reckons that up to 70% of the company’s portfolio can still be saved.
Blockbusters currently runs 528 stores in the UK, all of which will remain open while Deloitte does its work. And these stores will still be accepting gift cards, adds Manning. No doubt Blockbuster are hoping to escape some of the opprobrium heaped on HMV after it announced its gift cards were suddenly worthless. Neverthless, these are dark times for the firm’s 4,190 staff, whose jobs hang in the balance.
As for Blockbusters’ loyal customers – all two million of them – they will have to turn to the handful of independent stores still running. For Londoners, stores like Video City in Notting Hill or The Film Shop in London Fields may fit the bill. But pickings are decidedly slimmer outside the capital, where Blockbuster holds the monopoly in many towns.
Blockbuster is the third major retailer to go into administration over the past week: first Jessops, then HMV and now Blockbuster. All remembered fondly by MT from the halcyon days of its youth. Will they be missed? The internet has given us this Brave New World, let’s just hope it doesn’t end up resembling the one of Huxley’s imagining.