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Blockbuster Canada follows U.S. parent into bankruptcy.

rafterman

A sadder and a wiser man
Feb 15, 2004
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Been a long slow fall from the heyday of the 90's.

Blockbuster Canada pushed into receivership
STEVE LADURANTAYE
14:55 EST Thursday, May 05, 2011

Blockbuster Canada has been pushed into receivership by the Hollywood giants that provided it with new releases, after the studios called in $67-million (U.S.) in debt racked up by its U.S. parent company.

The surprise move comes weeks after its U.S. parent company was sold to satellite television provider Dish Network for $228-million, following a Chapter 11 bankruptcy filing in the United States that the company blamed on the changing viewership habits of its customers.

Executives at the Canadian subsidiary insisted throughout the U.S. restructuring that business remained brisk, despite the recent entry of streaming-video provider Netflix and the proliferation of video-on-demand services by the country’s cable and satellite providers.

But as the U.S. firm struggled to avoid bankruptcy in early 2010, it offered its Canadian subsidiary as collateral to the movie studios to ensure a steady supply of new releases. With the U.S. bankruptcy restructuring resolved, the studios are looking to recoup what they can by selling the Canadian operations.

They asked an Ontario court to place the company into receivership on Tuesday, and the motion was granted Wednesday. The studios would not comment.

The company is now on the block – its 400-plus stores will be kept open by receiver Grant Thornton Ltd. as it pursues a sale. Employees have been told they will now be paid weekly instead of bi-weekly, have been issued their vacation pay and told not to sell gift certificates for the foreseeable future.

“The company’s stores are open for business,” the receiver said in a statement. “The receiver expects to initiate a process in the near term to identify parties interested in purchasing Blockbuster Canada’s enterprise and assets.”

There’s reason to believe there will be interest in the Canadian company. Brahm Eiley of Convergence Consulting Group Ltd. estimated the company was profitable, and generated about $400-million (Canadian) in revenue in 2010 – including rentals and the sale of movies and items such as popcorn and candy.

“Everyone will go on about how this is all because of Netflix but nothing could be further from the truth,” Mr. Eiley said. “Blockbuster is the dominant rental player in Canada, and although it was reducing its number of stores, it was still clocking in some very solid revenue. Competition in Canada is nothing compared to the U.S.”

Video stores only accounted for 43 per cent of all rental revenue in the U.S. at the end of 2010, he said, compared to 94 per cent in Canada. While alternatives such as video kiosks, online services and mail order offerings have increased in Canada, he said it could be a decade before Canadians catch up with their U.S. counterparts.

Even as the deal closed for the U.S. company last month, it was generating a loss of about $67-million (U.S.). Its new owner plans to close about half of the remaining 2,400 stores. At its peak, it owned more than 9,000 stores in the U.S. alone and had a market capitalization near $5-billion.

Its largest Canadian competitors – Videotron and Rogers – have been reducing the number of their locations in response to decreasing store visits and aren’t considered likely to buy the chain.

That could bring an interesting range of alternative buyers to the market. One possibility could be Wind Mobile. The Egyptian-funded cellphone company has set up mini-stores within Blockbusters in a bid for a retail presence, and chairman Vincent Lacavera has expressed interest in developing storefronts.

He said Wind Mobile started looking at contingency plans for its retail strategy when the U.S. Blockbuster ran into trouble, but wouldn’t elaborate on his plans, other than to say that the deal with Blockbuster was eventually going to be problematic for Wind as it opened its own locations.

“We started thinking about backup plans months ago,” he said. “They were far more healthy than the U.S. company, so we are cautiously optimistic they will keep going. But we’re monitoring it closely.”
 

Larry_Fyne

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Feb 8, 2005
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BB Canada is not bankrupt. In the fall the US parent used the profitable Canadian company as colateral to appease the US-based movie studios. If the US company became insolvent, the studios could get $67 million from the Canadian company. BB US was recently sold to the Dish Network. The sale did not include any foreign assets. So now the studios have to exercise their option on the Canadian business and force it into receivership.

There is not $67 million in assets so they will not get everything. No one is going to buy the company. So in a couple of months your only rental option will be Netflix (if it is not a new release), Rogers on demand, Rogers video rental or a Mom and Pop shop. Or you can buy the DVD.
 

rafterman

A sadder and a wiser man
Feb 15, 2004
3,423
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Yes I see you are right but bottom line BB Canada will be history shortly and surmising the stores are closed enmasse they will sit vacant in every strip mall and power center across the land for years to come.
 

Keebler Elf

The Original Elf
Aug 31, 2001
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Netflix has a problem in Canada in the form of more restrictive/costly bandwidth limits. That's a major problem when it comes to transitioning to online movies on demand.

I've been expecting BB to go under for the past 2-3 years, to the point that I stopped buying the annual entertainment package that gives you $2 off every month. It was a great deal but I still have unused coupons (only a few left now) and I wanted to get rid of them before the company goes under, let alone buying more.

Looks like I was smart to do so!
 

rafterman

A sadder and a wiser man
Feb 15, 2004
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Ha ha ha the Globe is reporting today that the new owner in the U.S. is trying to restrict Blockbuster from even using the name in Canada.


Rename yourself, Blockbuster Canada told
Steve Ladurantaye
06:01 EST Tuesday, May 24, 2011

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Canadians may soon find themselves renting movies from “The Store Formerly Known As Blockbuster.”

Blockbuster Inc.'s new parents want to sever ties with its former Canadian subsidiary by forcing Blockbuster Canada to rename itself, but the receiver tasked with selling the Canadian chain is asking a U.S. court to ignore the request.

Blockbuster Canada was put into receivership earlier this month, and will be sold to pay $70-million in debt racked up by its former parent company. When the U.S. parent was trying to stave off bankruptcy, it used the profitable Canadian operations as collateral to the movie studios it counted on for its new releases.

The parent company was sold in an auction to Dish Network Corp. last month, for $320-million. The sale didn't include the Canadian subsidiary. The movie studios were still owed money after the sale, and turned to the Canadian operations for their cash.

Court filings indicate that Dish Network doesn't want Blockbuster Canada to use the intellectual property it now owns, even though the 400 Canadian stores have been operating under that banner since 1990. It also wants the Canadian chain to stop using any “confidential and proprietary information, business methods, and processes, trademarks, copyrighted materials, software programs and other intangibles.”

Saying the name “is critical to Blockbuster Canada's ongoing business operations,” receiver Grant Thornton filed a motion in a New York courtroom to block the move, arguing it's up to a Canadian court to determine how the company should operate while in receivership.

It filed for Chapter 15 bankruptcy in the U.S., which protects companies with U.S. ties which are restructuring outside its borders. A hearing will be held on June 2.

“If Blockbuster Canada were to be deprived of the use of the Intellectual Property, it would have a devastating impact on its business operations,” Grant Thornton's request to the court read.

While the U.S. chain was losing money as consumers opted for alternatives such as mail-order DVDs, mall kiosks and Internet services such as Netflix, the Canadian operations had $117-million in assets - including $15-million in cash - when pushed into receivership, according to documents filed last week by receiver Grant Thornton.

While the studios pushed the chain into receivership, 1,300 smaller creditors are also waiting to see if the chain's sale will garner enough to pay all outstanding debt. Anything that reduces the final sale price - such as a name change - could affect how much they ultimately receive.

“Blockbuster Canada intends to vigorously contest the rejection motion,” the company said in court papers.

Grant Thornton had no comment Monday night, but said it would issue a press release Tuesday to update its plans for the stores. Store managers have been warned some outlets could close, employees have been shifted to weekly pay periods and told not to issue gift cards or anything that can be redeemed in the future.
 
Jun 11, 2007
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I cant remember the last time I went into a BB. I mean, who doesnt love waiting 30 minutes on a friday night, shuffling through the over-priced candy maze (when did they get the idea that they could charge theatre prices?) to rent a cheesy POS for $7 (or whatever the current price is) when you can dial the same movie up from your couch with the VOD system for a dollar less? Good riddance!
 

Mod100

Super Moderator
Feb 18, 2010
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Well, on the other hand one can get some pretty good deals on previously viewed Blu-ray movies. Picked up three this last weekend.:cool:




I cant remember the last time I went into a BB. I mean, who doesnt love waiting 30 minutes on a friday night, shuffling through the over-priced candy maze (when did they get the idea that they could charge theatre prices?) to rent a cheesy POS for $7 (or whatever the current price is) when you can dial the same movie up from your couch with the VOD system for a dollar less? Good riddance!
 

alexmst

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Ashley Madison
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