Debt, Changing Media Habits Topple Blockbuster

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Now that Blockbuster has filed for bankruptcy protection, the question is whether the firm can reorganize and go on to live another day. Under the plan filed Thursday, the company cuts its debt by about $900 million. And it gets a cash infusion of $125 million.

STEVE INSKEEP, host:

NPR's business news starts with Blockbuster's bankruptcy.

(Soundbite of music)

INSKEEP: What was once the biggest name in the movie rental business is now in Chapter 11. Blockbuster says its stores will stay open as it tries to fix its balance sheet.

NPR's Tamara Keith reports on the long-term future of a company that may not have a future.

TAMARA KEITH: In the battle with Netflix and Redbox and video on demand, Michael Pachter says Blockbuster lost.

Mr. MICHAEL PACHTER (Wedbush Morgan Securities): Blockbuster stuck with, you know, an old model for a little bit too long.

KEITH: Pachter is a research analyst a Wedbush Securities in Los Angeles. In preparation for bankruptcy, Blockbuster struck a deal with most of its creditors to wipe out nearly a billion dollars of debt and make it more like 100 million. But he says the company doesn't appear to be preparing for a turnaround - more like a slow winding down.

Mr. PACHTER: I think they will offer a streamlined brick and mortar offering and probably, you know, shorter operating hours and slightly dirtier carpets and, you know, they'll do everything they can to squeeze every last bit of cash out and return it to these creditors who are about to become shareholders.

KEITH: One of those creditors is billionaire investor Carl Icahn, who is now said to hold about a 30 percent stake in the company. But Douglas McIntyre, the editor at 24/7 Wall Street, says even smart guys like Icahn are wrong sometimes.

Mr. DOUGLAS MCINTYRE (Editor, 24/7 Wall Street): It is very hard to see what the company has left that's highly valuable, including its brand.

KEITH: Five years from now, does Blockbuster exist in your mind?

Mr. MCINTYRE: I doubt it.

KEITH: And if he's right, that means the days of aimlessly wandering the aisles looking for something to watch will be gone for good.

Tamara Keith, NPR News.

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