Failures of Blockbuster Essay

1134 Words Feb 5th, 2013 5 Pages
Blockbuster Incorporation Blockbuster was “the largest movie rental chain” in the Movies industry around the world (Biesada a). According to Rourke, Rothburd and Stansell (2006), Blockbuster mainly focused on “providing in-home rental, retail movie, and game entertainment”. It created 9,100 video stores and provided services to almost three million of customers in America and 24 other countries (p. 74). In 2010, the company filed for bankruptcy since it failed to adapt new technology in their strategies, and “was sold to satellite TV service provider DISH Network in 2011” (Biesada b). Blockbuster used to have so much power in the movie rental industry until Redbox and Netflix have come to the market. One of Porter’s five forces …show more content…
Based on the Form 10-K (2010), Blockbuster stated that: “Our level of indebtedness may make it more difficult for us to pay our debts as they become due and more necessary for us to divert our cash flow from operations to debt service payments” (p. 22). At the end of 2009, their long-term debt went up to 855.9 million of dollars (Form 10-K, p.40). One of the factors that negatively affected Blockbuster’s income and cash flow due to their debt obligation was the payment due date. It made even more difficult for Blockbuster to pay off the debts when the company faced economic downturns. The decrease in revenue made Blockbuster’s obligation and interest higher. Due to this fact, the company had a limited fund to contribute their strategy and operation. While their revenue decreased and debt increased, Blockbuster gradually lost their ability to remain the war price as low as others. The company ended up going bankrupt. The first failure of Blockbuster’s strategies, which lead it to bankruptcy, was the negative relationship with their consumers. While Netflix’s chief executive, Reed Hastings, recognized the technology had been grown rapidly and would change the transmission of movie rental industry, Blockbuster’s CEO, James Keyes, believed that consumers would still prefer to the brick-and-mortar rental structure. Thus, Keyes planned to focus on expanding Blockbuster’s stores into various departments