By Ed Oswald | Monday, April 6, 2009 at 9:27 pm
The death knell may be ringing for Blockbuster. Today the video-rental giant admitted that if it cannot complete the financing deals that it is currently working on, there is a good chance the company may be forced to shut its doors. While the company last week said it was in the process of getting a $250 million revolving loan from creditors, that may be in jeopardy.
Why? The loan apparently has some conditions to it, and Blockbuster is now not sure it can meet them. Even worse, whether the loan goes through are not, it is not even sure that would be enough to save the company.
During my days at BetaNews, I always seemed to get the Netflix vs. Blockbuster stories and the pricing war and war of words that went on between the two. I can tell you from what I wrote during that period that Blockbuster’s financial problems stem from that fight.
Neither side was willing to lay off, and both put out lots of money to one up the other through promotions, advertising, and the like. Even more, the pricing war that went on between the two cut into each company’s revenues. While Netflix is still going, it too was bruised financially by the fight.
(It’s probably fair to say Netflix’s lack of overhead is why its wounds were less deep.)
I sure hope that Blockbuster can find a way out of this mess, but it could be a victim of the changing face of how we consume media just like the newspaper industry. I guess time will tell.