April 14, 2010, 12:00 AM

Blockbuster inks deals with two studios in a fight to stay competitive

In addition to the deals, which will enable the retailer to sell and rent all of the studios’ DVDs the day they are released, Blockbuster has arranged payment terms designed to bolster the retailer’s finances.

Internet Retailer
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Blockbuster Inc. has announced agreements with Twentieth Century Fox Home Entertainment LLC and Sony Pictures Home Entertainment Inc. that, along with a previously announced agreement with Warner Home Video, will provide “day-and-date availability” of movies for Blockbuster’s store and mail channels.

“Day-and-date” availability means the rental giant can sell and rent DVDs beginning the day they are released, which is significant because movie studios sometimes restrict availability through certain channels, particularly online and mail, that delay when consumers can buy or rent DVDs.

Additionally, those studios will provide new enhanced payment terms to Blockbuster in exchange for a first lien on Blockbuster Canada Co.’s assets. Blockbuster Canada will continue with business as usual, says Blockbuster, No. 37 in the Internet Retailer Top 500 Guide.

“These important steps with three of the leading movie studios will continue a steady supply of top-rated movies for Blockbuster customers,” says Tom Casey, the retailer’s executive vice president and chief financial officer. “These positive signs of studio support are part of our overall recapitalization effort to drive top-line performance while reducing debt and operating costs at Blockbuster.”

The new payment terms are part of a series of steps Blockbuster has taken to bolster its finances. Blockbuster previously announced efforts to recapitalize the company and assure its long-term growth and success. Blockbuster will continue to monitor store performance and close stores where it deems necessary, as well as aggressively manage working capital, the company says. Blockbuster said in September it might close up to 25% of its stores within the next year.

Additionally, Blockbuster has implemented a plan that cuts operating costs by $200 million this year to preserve cash and further improve liquidity. Blockbuster is also in discussions with advisors for its bondholders related to debt recapitalization.

Blockbuster in March said its liquidity constraints and tougher competition may force the company to file for bankruptcy protection. It could be forced to take that step, it said, unless it can convince its creditors to restructure a large chunk of the company’s debt or its declining video and game rental business manages a turnaround, according to a March 16 filing with the U.S. Securities and Exchange Commission.

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