Free Custom «Blockbuster’s Bankruptcy» Essay Paper

Many economic experts are of the opinion that Blockbuster’s bankruptcy woe was a direct result of online video streaming. Online video streaming by two rival companies, Netflix and Redbox changed the whole economic chemistry of a company that was once the talk of the nation to mere rubble. Blockbuster did not take serious the effects of changing technology on its business operations. The online video streaming and mail order video renting adopted by Redbox and Netflix respectively reduced the costs incurred by consumers for every movie (De La Merced, 2010).

By adopting the online video streaming, the two companies avoided certain expenses which Blockbuster could not. For instance, the two companies did not require leases for stores since they both operated online within a small center. More so, online video streaming requires only few employees to keep operations running. Blockbuster with its traditional business methods was not able to cope with the new competition and had to continue to meet the heavy expenses of leases and employee salaries. These expenses were massive compared to the diminishing revenue into the company, hence plunging the company into bankruptcy (Filson, 2004).

 

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To come out of bankruptcy, Blockbuster first did the honorable thing of filling for bankruptcy status. Subsequently, the board and shareholders announced for the sale of the company through public auctioneering which attracted several investors. In the long run, the DISH Networks won the bid and bought the company at a whooping $320 million. These proceeds from the sale of the company helped the company to meet some of its debts which by 2010 was $900 million (Jin, 2007).

To further help put the company back to normalcy; Dish Network has adopted radical economic surgeries. One of those surgeries has been the closing of various stores that make the new company to incur more expenses. The closure of these stores also comes hand in hand with job cuts for many employees. These surgeries have the effect of reducing company expenditure, hence correcting company balance sheet (De La Merced, 2010).