updated 05:45 pm EST, Mon February 21, 2011
Blockbuster to sell itself off post-bankruptcy
Blockbuster said on Monday that it planned to auction itself off post-bankruptcy with an uncommon trick to guarantee a minimum price. The company is using a "stalking horse" bid from an investment fund coalition, Cobalt Video Holdco, to set a minimum bid of $290 million. The deal would see companies already investing in Blockbuster buy it out if there were no takers but would get a better deal from a third party.
CEO Jim Keyes made clear that he hoped for an outsider to make the purchase. He singled out the company's still well-known brand name, its rights to 125,000 movies for rental, movie distribution, and the "millions of loyal customers" it still had. He hinted it might appeal to a would-be Netflix rival.
"Because of its ability to deliver physical content (through DVDs) and digital content (through streaming), Blockbuster can offer customers the unique ability to access any movie, any time," he said.
The sell-off would require approval by the bankruptcy court but would move quickly, requiring meaningful offers within 30 days of the court's go-ahead. An auction would go ahead within a week of the bidding deadline and would see any deal approved and completed no later than April 20.
Blockbuster's eagerness to find an outside owner suggests its traditional business model may still face pressure even after the reorganization and planned store closures. Despite its buyout of CinemaNow and its attempts to prop up retail through plans for kiosks and newer store styles, the chain has so far been unable to compete with services that rely partly or entirely on the Internet for video. Blockbuster stores still typically depend on having a limited selection of video where Internet rivals can either mail out physical copies from much larger warehouses or simply deliver an online copy.
In the US, iTunes is the largest video source online. Netflix is potentially larger overall owing to its physical rental business, but it has a fraction of the content due to reluctance from studios to abide by a flat-rate subscription plan.