Blockbuster goes into administration

 
People walk past Blockbusters store (file photo 2010) Blockbusters has closed some branches in the past few years

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DVD rental firm Blockbuster has become the latest UK High Street firm to go into administration after struggling against online competitors.

The chain has 528 stores and employs 4,190 staff.

Deloitte, the accountancy firm which will now take over running the firm, said Blockbuster UK would keep trading while it tries to find a buyer.

Music chain HMV and camera-seller Jessops both went into administration earlier this month.

"We are working closely with [Blockbuster UK's] suppliers and employees to ensure the business has the best possible platform to secure a sale, preserve jobs and generate as much value as possible for all creditors," said Lee Manning, from Deloitte's Restructuring Services practice.

"The core of the business is still profitable and we will continue to trade as normal in both retail and rental whilst we seek a buyer for all or parts of the business as a going concern.

"During this time gift cards and credit acquired through Blockbuster's trade-in scheme will be honoured towards the purchase of goods."

Many people were unhappy with the administrators' decision not to accept HMV gift vouchers, some of which had been given as Christmas presents.

It is not yet known what will happen to HMV's branches and 4,350 staff. Unusually, all of Jessops' 187 branches closed within days of administrators being appointed.

January retail administrations

Branches Staff

More High Street casualties

Man walks past HMV sign

HMV

239

4,350

Jessops sign

Jessops

187

1,500

Blockbusters sign

Blockbuster UK

528

4,190

In the run up to Christmas, electricals retailer Comet collapsed and shoe chain Stead and Simpson announced it was closing 90 stores.

The Local Data Company which monitors the number of empty shops, said the recent failures added up to the worst period for the High Street it has seen.

"The administration and potential closure of over 1,400 stores in less than a month far surpasses Woolworths' 807 in January 2009," said director Matthew Hopkinson.

"This has the potential to increase the national shop vacancy rate by nearly 5% to an all time high of over 19% if all the stores close and are not reoccupied.

"The big question is how many more retailers are struggling out there to the point of administration?" he said.

Store closures

Start Quote

It is shocking that the [Blockbuster] board and executive management failed to make bold choices”

End Quote Prof Ajay Bhalla Cass Business School

The first Blockbuster store in the UK opened in south London in 1989, and the firm has sought to expand its services in recent years, including with a trade-in facility for pre-owned titles.

The firm launched an online DVD rental operation in 2002, and the company's website, blockbuster.co.uk, claims to send out more discs per customer than other online DVD rental services in the UK.

However, this online rental market became increasingly crowded with rival services, and now the popularity of streaming films over the internet is growing fast.

Blockbuster UK has closed more than 100 outlets in the past few years.

Blockbuster went bankrupt in the US in 2011, but was rescued by US pay-TV provider Dish Network in a $320m (£200m) deal, which saved hundreds of US stores from closing. The UK arm is also owned by Dish Network and run separately.

Before Blockbuster was bought by Dish Network, there were media reports of ambitious expansion plans, including selling electrical goods such as televisions, mobile phones, and iPods.

But business experts said Blockbuster's problems were all too similar to those hitting other retailers - failure to adapt quickly enough to a changing business environment and consumer habits.

'Altered landscape'

Professor Ajay Bhalla, of Cass Business School, said: "The company, like HMV, failed to transform its business model early enough. When it did, it found a fundamentally altered competitive landscape where the platform model had destroyed the traditional retail one.

"Firms like Blockbuster failed to face up to the enormity of the change and altered their business model on the fringes (eg selling second-hand products), rather than coming up with an innovative offering. It is shocking that the board and executive management failed to make bold choices."

Dr Steve Musson, a lecturer at the University of Reading and an expert in the economics of UK cities, added: "The retail businesses that we have seen going into administration since Christmas have a lot in common - they have large numbers of stores and have struggled to adapt to changing retail habits.

"Rents for retail businesses are usually payable quarterly, with many landlords most recently asking for payment at the end of December, which is why we often see retail failures coming in clusters."

 

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  • rate this
    0

    Comment number 83.

    74.Kelly
    Just now
    @61.darren
    ======
    I concur that many facets and personnel of the BBC is very good and even exceptional at times, but I refer to the business model and the way revenue is collected as though it is a tax
    ----
    Not as though it is a tax.. Its IS a tax. You can go to prison for not paying your licence fee in the same was as if you do not pay your council tax.

  • rate this
    +11

    Comment number 82.

    All that will be left of High Streets will be the odd pub. Night Clubs.
    Dole office at the back.
    And that is it.
    Dead during the day.
    A few kebab shops opening up to catch the club trade.

  • rate this
    +1

    Comment number 81.

    67.Bob
    CASH FLOW! I matters not that they were making money if they ran out of cash! Their suppliers would not fund their inability to manage cash, as the old saying goes "Cash is KING!" Simple and basic, size does not matter with these guys, they just ran out of money to pay their way...

  • rate this
    +7

    Comment number 80.

    Robert Peston made a very interesting point about HMV. Record producers do not want to have to rely on just Amazon or iTunes for distribution, so they may just make life easier for a revamped HMV. The same argument may hold for Blockbusters. It is not in the producers' interest to have a limited methods of distribution.

  • rate this
    +2

    Comment number 79.

    When Tesco's and Asda knock-out DVD's for a few quid, there are no margins left for the high street stores. There is very little that the high street can do that the 'tinterweb cannot. Could this now be the time to start housing people back into City Centres? Infact, wasn't that how they started in the first place? ATM all it is is Charity Shops and Empty Units...

  • rate this
    +1

    Comment number 78.

    72. Vampire
    "I like David Attenborough too, but he's not worth £150."

    You can't put a price on the wonder Attenborough beams into your front room... And thats without mentioning the greatness of a broadcaster that caters for all manner of niche tastes and educational programming, as well as dross, it has to be said, like dancing on ice et al.

  • rate this
    +1

    Comment number 77.

    Never understood how Blockbusters survived in the internet age, renting videos was so 1980s. Shops the size of supermarkets on the high street? I don't think so.
    The fact is that we can download anything in minutes for a few pence from anywhere and the international companies have zero overheads here in the UK, no tax, no shops, no staff etc etc.
    High streets will change but that's progress.

  • rate this
    -1

    Comment number 76.

    Oh come on!, we all saw this coming......you can't make money from old tech like CD and DVD. If someone asked me if HMV or Blockbusters were going to go bust i'd have said "yes 5 years ago". There are other retailers marked for doom too, watch out W H Smiths and shops where you can buy off the internet for 70% less without getting off the couch, shame but we let it happen didn't we?

  • rate this
    +1

    Comment number 75.

    Its not news that fewer people want to rent or buy dvds these days, or cameras from Jessops or music from HMV. And it isnt just a failure to compete with internet-based sellers doing what they do.Have they not noticed that how folk want to photograph, access music,get movies is changing rather fast?What have their boards been doing?Has their fate not been obvious unless they reinvent these stores?

  • rate this
    +1

    Comment number 74.

    @61.darren
    ======
    I concur that many facets and personnel of the BBC is very good and even exceptional at times, but I refer to the business model and the way revenue is collected as though it is a tax.

    Part of the funding is to find its way into other (commercial) channels now.

    The internet is also taking away air-wave traffic, so like it or not, change is on the cards.

  • rate this
    +15

    Comment number 73.

    So what happens about the lost income, presumably your local council will have to make it up somehow probably on your council tax bill or make cuts. It begs the question how long will it be before central govt decide some kind of additional tax on internet shopping is in order to make up for the lost revenue.

  • rate this
    0

    Comment number 72.

    @57. Kelly

    "David Attenborough alone is worth the License fee for the rest of time."

    I like David Attenborough too, but he's not worth £150.

  • rate this
    +19

    Comment number 71.

    So lets get it right. So this is our model of Capitalism.

    We prop up and save the Banks so they can award themselves more bonuses and perks and Cameron can award them state benefits on top of it all.

    But we sit back and let the much loved high street die.

    The lunatics are in charge of the asylum in our system.

  • rate this
    +22

    Comment number 70.

    16,000 gone from strivers to skivers in 3 weeks

  • rate this
    +5

    Comment number 69.

    The retail outlets closing at the moment seem to be mainly because of changes in technology effecting how we purchase goods rather than the economic downturn. This change in how we shop is leaving many of our town centres in a desperate state of decay and we really need to be having a debate how we invest in and reinvent the function of town centres.

  • rate this
    0

    Comment number 68.

    ...and the times they are a changing!

  • rate this
    +1

    Comment number 67.

    Interesting the lack of knowledge even from some of the so called 'experts'. No wonder these people failed to warn about the economic crisis. Go and research. I did. Jessops for example had an extremely successful web presence and was streets ahead in its market, was making a profit and beating sales targets plus only had a small debt with the bank as part of a long term agreement.Suspicious.

  • rate this
    -9

    Comment number 66.

    To all our left wingers desperate to foist blame on the government, it is a case of all in it together, even the directors and managers will end up jobless.
    It does beg the question why and how much longer the BBC will be able to justify taking £145 tax off us! They have tried today with the VALUE ADD Trick, ie suggesting that the good the licence fee does is doubled when THEY spend it!How daft!

  • rate this
    +3

    Comment number 65.

    46 littlemisterfurious
    Yes,I suppose when you rent a film online for 24/48 hours you can never incur "late fees"
    Although I know it's cheaper than actually buying the DVD,I do think that £3/£4 pounds to be able to watch a film for this ltd time is VERY expensive and would love to know the profit margins of Sky,Virgin.
    I remember 20 years ago a friend selling his video store,what IQ do CEOs have?

  • rate this
    -3

    Comment number 64.

    Perhaps we can now move to a more efficient economy where people don't drive to a building to sell pointless trinkets to other people who have also driven to that building.

 

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