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
    +3

    Comment number 263.

    It is clear that the shift in online sales has effected retailers greatly, and it will continue to do so for many more years and its effects will only further increase. At the same time it is rather ridiculous that the massive shop floor space at my local town centre still has the woolworths sign up, and when you peak through the windows, 100s of square foot of space that hasn't been used in years

  • rate this
    +3

    Comment number 262.

    251. Pete Greenfield
    I don't know how any physical shops are going to survive.
    ___

    Outside of certain shopping centres and out of town retail parks, the bricks and mortar shops are dying a slow but inevitable death. At some point in a decade or so, the large derelict areas will hopefully be redeveloped into other uses. Looking at the bigger picture, this isn't necessarily a bad thing!

  • rate this
    +1

    Comment number 261.

    251, not always true, if you make the effort to go to town, pay the parking etc, have you made a saving?. Doesn't your time have a value? I shop on line sometimes, mostly to avoid poor sales staff, and use GOOD shops with experts if I need to and get advice, afraid none of the recent failures could possibly be described as good.

  • rate this
    -1

    Comment number 260.

    Thats three shops in my town centre in the last week,plus Dixons before Xmas. Will do wonders for my job prospects.Mind you, Eric Pickles might be pleased - all this space can be converted into housing for his Bulgarians and Romanians coming in....God help this country

  • rate this
    +7

    Comment number 259.

    Why would anyone go to blockbuster and rent a movie at £3 a go when they can subscribe to Love Film for a tenner and get unlimited rentals a month? Then there are the cheap and convenient streaming options that are no different to rentals. Another business that has contributed to it's own downfall by failing to adapt to changing markets.

  • rate this
    +4

    Comment number 258.

    @Alex Super Tramp:
    Illegal downloads do not harm the economy in the long run because it enables people to spend money on other things. I don't understand how its completely legal to listen to a song on Youtube yet so wrong to download from a torrent.

    The music industry has been exorbitant for decades, its about time artists had to work for a living and the fatcat labels went down.

  • rate this
    +1

    Comment number 257.

    2 companies sell the same item online. The one in the town centre pays more rent and double the business rates than the one on the industrial estate,the one on the high street goes bust. The High Street is doomed until Goverment changes the business rate, tax and rental model.

  • rate this
    -2

    Comment number 256.

    Shame our blockbusters in lower earley reading is busy. Ive tried online...both the big ones and they rubbish..quality is rubbish compared to bluray and sound quailty is even worse. As for disks you dont get the disks you want or as quick and alot are scratched. I just dont get some people as they pay 00s or 000s an av setup and play rubbish quality over it most films are 720p and stereo.

  • rate this
    +1

    Comment number 255.

    @247 illegal downloads happen, charging £15 for a CD isn't going to make people think 'oh ok i'll buy it' nor do anything to get rid of it - yes there will always be the argument of you cant compete with free & those people are probably the ones who shoplifted before the internet but, as Amazon's misprice on songs a few years back proved - people WILL buy things if you price it realistically

  • rate this
    +1

    Comment number 254.

    238. Matty
    "I prefer online shopping, have had very few problems with this method of purchasing, and online shops still employ people so benefit the economy"
    Online employs less and online retailers pay less tax here. Also many deliveries to workplaces and ordered in work time so costs to employers. Grocery online shopping makes a loss costs £15-20 an order but charge £5. Car use still rising.

  • Comment number 253.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +4

    Comment number 252.

    187. rik - too late for what?

    If going into town means going to pubs, restaurants, or other activities rather than wading through stores trying to sell me overpriced things that I don't want I'm fine with this.

  • rate this
    +1

    Comment number 251.

    I don't know how any physical shops are going to survive. People go in, look at stuff and then go and buy it cheaper online. It'll just be pound shops and hairdressers at this rate.

  • rate this
    +6

    Comment number 250.

    It's okay, I'm sure the internet is just a fad and they'll all be back next year.

  • rate this
    +3

    Comment number 249.

    At least online shopping is warm & comfortable!

  • rate this
    +7

    Comment number 248.

    When village shops first started people complained that they would destroy the town markets! 'Twas ever thus, but no business model has a divine right to succeed.

  • rate this
    -3

    Comment number 247.

    The reason why HMV went under was not just because people are buying it digitally online but also because people are downloading illegally. It seems to me that we are getting way over our heads and are not in control of our own destiny's any more. We find away to protect out work and someone finds away to ruin it.

  • rate this
    0

    Comment number 246.

    Sergoba, its not the Governments fault (for once.)

    Its just business competition. The internet can offer cheaper prices and therefore thats who people use. Music shops have been ripping us off blind for years, there is no way it costs £12-18 to produce a music CD.
    As for Blockbuster, that business model was well and truly out of date.They should have modernised with something like netflicks.

  • rate this
    +5

    Comment number 245.

    Unfortunately another business model busted by the internet. Not only by 'DVD through the post' services but now Video On Demand over the Internet, available at high speed in most of the suburban areas Blockbuster serviced. Who wants to trudge down to the DVD shop when it's -5C when you can pay-as-you-go and watch instantly from the comfort of your sofa?

  • rate this
    +6

    Comment number 244.

    @169. absolute tosh? thats rubbish - these companies - specifically HMV have failed to react to the marketplace - they saw Woolworths & Zavvi close and STILL chose to charge well above even their own online presence.

    as a former employee of Blockbuster, i can tell you they absolutely did not move with the times, in midst of the DVD hayday, there were walls of VHS tapes lining the store

 

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