Sunday, February 26, 2012

Block Busted

I was driving down the street yesterday and saw the neighborhood Blockbuster was closing down.  This weekend.  Everything had to go.  Now, while I picked up some very nice deals, long-term this stinks.  I am one of those dinosaurs who does not stream movies on line.  Oh, I will, but it isn't the way I like to do it.  I'll have more of this, particular rant later, but for now I'll just say that I like having the hard copy in my own hands.  I don't like depending on someone else's servers and someone else's connections.

Anyway.  A little digging told me what was going on at Blockbuster.  Back in July, Blockbuster was trumpeting the successful conclusion of a Chapter 11 liquidation, having sold the farm to Dish Network.  90% of the stores would remain open, jobs would be saved, landlords would not be facing yet more dark space, blah, blah blah.  The sun was bright, and all was right with the world.
A happy ending is a story that hasn't finished yet.

Digging through Dish Network's latest 10-K yields the following on page 31:
In addition, our Blockbuster retail store operations face increasing competition from video rental kiosk, streaming and mail order businesses. These competitive pressures have contributed to weak store-level financial performance at many of our Blockbuster retail stores. We expect to close over 500 domestic stores during the first half of 2012 as a result of weak store-level financial performance.

We continue to evaluate the impact of certain factors, including, among other things, competitive pressures, the scale of our Blockbuster retail operations and other issues impacting the store-level financial performance of our Blockbuster retail stores. These factors, or other reasons, could lead us to close additional Blockbuster retail stores. There is no assurance that we will achieve the expected benefits from the Blockbuster Acquisition.

That's 1/3 of the stores Dish bought being shut down now, with more coming.  So much for saving the stores, the jobs, etc.

And that's the dirty, little secret of Chapter 11.  You can negotiate and strategize for months.  You can force a plan through.  You can even walk in with a pre-pack and all your ducks in a row and be out in a month.  And a year later, it can still all be gone.

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