VANCOUVER (NEWS1130) – Video rental giant Blockbuster Inc. is filing for bankruptcy protection in the United States, but its Canadian operations said they’re not affected by the reorganization.
Blockbuster Canada vice-president and general manager Barry Guest said in a statement early Thursday that its operations are still profitable.
“Blockbuster Canada operates independently of the U.S. and is financially stable,” he said.
“We have the assets and cash flow to execute our business plan.”
The troubled U.S. rental chain made a submission to the U.S. Bankruptcy Court in the Southern District of New York on Thursday, in which it outlined plans to recapitalize its balance sheet and transform its business model.
Once a home entertainment powerhouse in the United States, Blockbuster has been losing market share and money for years as more Americans rent DVDs from subscription service Netflix Inc. and popularity surged for streaming video over the Internet.
The company, which had warned investors it might file for bankruptcy protection, was delisted in early July by the New York Stock Exchange.
Blockbuster plans to reduce debt from nearly $1-billion (U.S.) to about $100 million or less by swapping debt for equity in a reorganized Blockbuster with bondholders that hold about 80.1 per cent of the company’s senior notes.
It has received commitments for $125 million in “debtor-in-possession” financing from senior noteholders to repay customers, suppliers and employees during the reorganization.
Blockbuster said its 3,000 stores in the U.S., DVD vending kiosks, by-mail and digital businesses will all continue to operate normally. Operations outside the U.S. and domestic and international franchisees are not part of the Chapter 11 reorganization.
In Canada, Blockbuster has 5,000 employees at 440 locations across the country.
The company’s traditional stores are facing an unprecedented barrage of competition across the country as “on demand” movies increase in popularity, and lower priced all-you-can-watch monthly plans begin to lure some customers away from the pay-per-rental model.
On Wednesday Netflix Inc. had a rocky start to its Canadian debut, launching a video-streaming website that offers unlimited movies for $7.99 a month.
However, the company’s debut was hindered by complaints that their website offered a limited selection of mostly older titles. A splashy launch in downtown Toronto was overshadowed when the company was outted for hiring actors to roam the streets playing the role of excited new customers.
Other Canadian companies are also vying for the rental market, including mail-order DVD rental business Zip.ca, which also plans to launch rental kiosks in Metro grocery stores that will offer DVDs for 99 cents a day.
Blockbuster Canada hinted in an interview Wednesday that it plans a “multi-channel” strategy to offer access to movies outside retail stores.