How Blockbuster Could Use Bankruptcy to Slay Competitors
At last, the long-running drama of debt-strapped Blockbuster (BBI) has moved to the bankruptcy-reorganization phase. With the bulk of its massive debt about to be scrubbed off the books in exchange for equity to its debtholders, the bankruptcy process gives Blockbuster its best shot at a happy ending.
The good news: Its bankruptcy filing reveals Blockbuster executives may finally be ready to make bold moves to reshape the company to fit today's movie-rental world.
As my BNET colleague Erik Sherman points out, Blockbuster has suffered from a dearth of creative thinking for decades. They began with a disruptive, innovative idea -- a movie-rental superstore with huge selection. But when new technology made that idea obsolete, they were deadly slow to react. That left room for Netflix (NFLX) and Redbox to move in on Blockbuster's turf with lower-overhead business models.
Under cover of bankruptcy, Blockbuster can completely transform the company if its execs have the guts. Key to survival will be the closure of the vast majority of Blockbuster's remaining 3,300 stores. Two hints that the company is headed that way:
- It closed more than 1,000 stores in the past two years.
- From its filing: "To preserve its three-decade long developed brand value, Blockbuster seeks a restructuring that permits a significant deleveraging of its business so that it can move forward at the digital clip at which its industry and competitors are currently running..." Translation: It's going to pay off debt that will reduce its monthly nut, and get out of a lot of leases while in bankruptcy, without having to pay to the end of each lease.
As far as its own stores, if Blockbuster kept one or two in each major market, it could create destination movie-event stores that reinforce their brand. Clear out a lot of the old physical inventory, provide kiosks for ordering movies electronically for titles not in stock, and install some big screens and game systems. Then, Blockbuster could be a place to hold video-gaming or movie-night parties.
It could be a Blockbuster night -- at Blockbuster. Now that's something Netflix and Redbox can't offer. With its new bankruptcy-debtor financing, the company could hopefully invest in a makeover for the remaining stores.
Blockbuster's whole secret sauce at this point is that it gets many major movies before its competitors. The company could host midnight-showing release parties at these reinvented flagship stores to build interest and promote that point of difference to customers. Basically, the remaining stores would become a marketing and customer-experience vehicle that could reinforce the company's brand in the real world.
Previously, Blockbuster had way too much presence, and didn't do enough with its stores to build customer enthusiasm for its brand. If Blockbuster really shakes up its model while it's in bankruptcy and thinks creatively again -- like it did at the start -- it could emerge a fit competitor for the digital-media age.
Photo via Flickr user Scott Clark
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