Blockbuster Closes 1 in 5 U.S. Stores, Rental Stores Fading Into Twilight

From DailyTech: Video juggernaut Blockbuster, long outmaneuvered and outsold competitors. But the industry giant rocked the rental industry last week, when it announced that it would be closing 960 of its 5,000 U.S. stores. Overnight Blockbuster, which also maintains 3,300 international stores, fell from a industry icon to a victim of a changing market in the minds of many. The writing, however, has been on the wall for some time now.

Blockbuster is also changing some stores over to used DVD outlets. In total its filing stated that as many as 1,335 to 1,560, mostly in the U.S. will close or be changed.

Blockbuster did get some good news. Sources indicated Friday that it managed to raise more money that it had hoped for in a private debt offering. The company, with the help of J.P. Morgan Chase, managed to secure $675M USD, when it only had expected $340M USD. With those assets Blockbuster will be able to both pay off its $572M USD in maturing debt and carry out plans to open 2,000 rental kiosks by the end of the year, followed by a planned 7,500 more in 2010.

In the end, Blockbuster is still the market's biggest player, but it faces the danger of falling behind two leading competitors -- Redbox and Netflix -- as the market shifts. Barry McCarthy, CFO of Netflix applauded his competitor's decision saying it was a smart move. He stated, "Blockbuster has been battling a headwind trying to right-size their capital structure. And it looks like they have made some important strides in making that happen. So congratulations for them."

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