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Movie Gallery Announces Full Liquidation, To Shutter All 2,415 Outlets

Tyler Durden's picture





 

Movie Gallery's Chapter 22 just turned into a 7. The WSJ reports that
the firm has decided to shutter all of its 2,415 stores and liquidate
completely. Previously, the bankrupt movie rental chain had hoped to
continue operating with a trimmed down asset base, and close just half
of its stores. Alas, the melting of the icecube
could not be stopped. This is nonetheless good news for liquidating
advisor Gordon Brothers which just saw its bill double. As for main
competitor Blockbuster, which itself is on the verge of bankruptcy
(yes, those still do occur in the US, but the business must be
really atrocious plus have no unionized workers anywhere within 50
miles of its operations), it is unclear whether the liquidation of
Movie Gallery will be beneficial or merely too late. Tangentially,
businesses all over America and the world which otherwise would benefit
from the bankruptcy of their weaker competitors and flourish, are
suffering just as much, courtesy of the no-risk/no-failure doctrine recently instituted by the administration, which has made Survival of the Fittest irrelevant.

More from the WSJ:

The Wilsonville, Ore., chain had hoped to restructure in bankruptcy court and continue operating around a smaller set of viable stores. The company employed more than 19,000 people when it filed for bankruptcy.

Reorganizing around smaller core stores was "honestly debated," said a person familiar with the situation. "It just never got any traction."

Movie Gallery, the second-largest movie-rental chain by outlets behind Blockbuster Inc., failed to rebound after it emerged from bankruptcy in spring 2008 owned by private-investment firms Sopris Capital Advisors and Aspen Advisors.

Consumers are now viewing movies streamed online or through on-demand cable services. Netflix Inc. has cut into revenues of Movie Gallery and Blockbuster through its mail-order service and online offerings. In addition, movie-watchers have turned to alternatives such as Redbox, a unit of Coinstar Inc. that operates movie-vending machines in grocery stores, among other places.

Movie Gallery's financial woes trace back to debt it took on acquiring Hollywood Entertainment Corp. in 2005. It filed for bankruptcy in February under the weight of roughly $600 million in debt.

Blockbuster had weighed acquiring some better-performing Movie Gallery stores, but a deal never gained momentum, said the person familiar with the matter. A Blockbuster spokeswoman didn't immediately respond to a request for comment.

Blockbuster is in the midst of negotiating with bondholders over restructuring debt and warned in a recent regulatory filing that it, too, could be forced to seek bankruptcy protection.

We dare you to guess which firm refinanced Movie Gallery in early 2007, with the firm filing for bankruptcy before even one coupon payment on its new notes was ever made.

 


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Sun, 05/02/2010 - 17:37 | Link to Comment Oracle of Kypseli
Oracle of Kypseli's picture

Nothing wrong with their marketing or their business plans.

Very simply they do not make good movies anymore. It's either skewed politics or ignorance of the art that interferes with the artists.

Game over

Sun, 05/02/2010 - 17:37 | Link to Comment LeBalance
LeBalance's picture

With direct download sources, the selection of Netflix, and location, location, location of RedBox I think this is survival of the fittest and the public need is being met better by the surviving servicers.

None of these entities is being propped up or bailed out, so I fail to see how your comment in the last sentence of the first paragraph is pertinent.

Sun, 05/02/2010 - 17:43 | Link to Comment cossack55
cossack55's picture

My guess:  Moodys

Sun, 05/02/2010 - 17:43 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Netflix blushes.

Sun, 05/02/2010 - 17:52 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

"We dare you to guess which firm refinanced Movie Gallery in early 2007, with the firm filing for bankruptcy before even one coupon payment on its new notes was ever made."

Wait a minute, don't tell me. I think I got it.

Hold it.......um........er.......let me think a sec...........er..........they're famous, right?........um.......have they been in the news lately?...........it's on the tip of my tongue.........damn, I almost got it..............could you give me a hint?

Sun, 05/02/2010 - 17:50 | Link to Comment Rick64
Rick64's picture

Sopris Capitol Advisors refinanced them. This chain as well as Blockbuster failed to change with the times even as they saw netflix gain momentum. They had the infrastructure where they could have outdone netflix and redbox, but failed to do so. BB tried too little too late. The local video store in my area has had to come down from $2.95 one day rental new release to $1.00 five day rental on new releases to compete with redbox and netflix.

Sun, 05/02/2010 - 19:22 | Link to Comment Common_Cents22
Common_Cents22's picture

blockbuster mail svc is real good especially when you live near a retail location.  You can return your mail movies to the store or exchange them there and they ship out your next in queue.  I can have six at a time this way sometimes while paying for 3 at a time. 

Not a stock recco but the services works good for me.

Sun, 05/02/2010 - 23:34 | Link to Comment jeff montanye
jeff montanye's picture

ditto

Sun, 05/02/2010 - 18:01 | Link to Comment weld1
weld1's picture

hey tyler take it easy on unions...we are the last stand for fair wages in this country. sure we got a little break here and there... FINALLY. remember that we are the people who brought you the weekend. we set the standard for wages all over the country to some degree.blue collar and white collar. we are not the ones without health insurance everyone is paying for, like it or not. we have our problems,but everyone cannot work for slave wages. people should hope we are around for a long time.

Sun, 05/02/2010 - 20:15 | Link to Comment Tipo anónimo
Tipo anónimo's picture

Hey, I agree that unions did their part in the late 1800's.......  Unfortunately, that is apparently where it all ended!

Sun, 05/02/2010 - 22:32 | Link to Comment dark pools of soros
dark pools of soros's picture

get rid of unions to chase the non union workers and then watch as you now compete vs slavery...    your move again, sir

Sun, 05/02/2010 - 23:37 | Link to Comment jeff montanye
jeff montanye's picture

not only that but are goldman, jp morgan, wells, citi and b of a hotbeds of unionism?

Sun, 05/02/2010 - 18:10 | Link to Comment Sudden Debt
Sudden Debt's picture

Where you not pushing Blockbuster 2 weeks ago? Now you're busting their balls!

Don't turn Zerohedge into some pinksheet pennystock pump and dump forum! This is far below the ethics of the site jerk!

Sun, 05/02/2010 - 18:16 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

Dude, what are you talking about? Use the search box above right, place Blockbuster in the space, hit "Search" and show me where ZH was pushing Blockbuster.

Mon, 05/03/2010 - 01:54 | Link to Comment Sudden Debt
Mon, 05/03/2010 - 10:43 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I call that a contributor, not Tyler and Zero Hedge. Under an article written by Tyler, you accused him and ZH of pushing Blockbuster. This is not the case.

I wrote numerous articles here on ZH. Does that mean ZH approved them or supported my opinion? Try reading the ZH disclaimer and conficts/full disclosure on the right hand side.

Grow up fool.

Sun, 05/02/2010 - 18:21 | Link to Comment Tyler Durden
Tyler Durden's picture

zero hedge has not had anything to say (and certainly nothing good) on BBI in probably well over a year.

Sun, 05/02/2010 - 22:33 | Link to Comment dark pools of soros
dark pools of soros's picture

is ZH unionized yet?  it seems Marla's been 'goldbrickin' a lot lately

Sun, 05/02/2010 - 18:30 | Link to Comment RobotTrader
RobotTrader's picture

Coinstar....

Redbox is a real winner for them.

Sun, 05/02/2010 - 18:46 | Link to Comment buzzsaw99
buzzsaw99's picture

Netflix bitchez. This should do small wonders for CRE prices.

Sun, 05/02/2010 - 22:35 | Link to Comment dark pools of soros
dark pools of soros's picture

chuckle  +1000 blue/yellow empty boxes

Sun, 05/02/2010 - 18:54 | Link to Comment jory
jory's picture

This is funny.  I know Mark Wattles, founder of Hollywood Video.  He's still living it up big time.  He cashed out on the sale to Movie Gallery and laughed all the way to the bank.  I heard he shorted Movie Gallery after he sold Hollywood Video.

Sun, 05/02/2010 - 18:56 | Link to Comment Rick64
Rick64's picture

I heard he got an employment offer from GS.

Sun, 05/02/2010 - 19:42 | Link to Comment excellent
excellent's picture

The only problem with unions is that everyone isn't in a union.

 

But people are fine with buying non-union products.

 

I'm bending the term to mean anything made or done under certain forms of duress and otherwise shitty conditions.

 

Too many people, and not enough of them care, so we're somehow fine with buying shit that's made the way it is.

 

Our fault, really.

Sun, 05/02/2010 - 21:05 | Link to Comment trillion_dollar...
trillion_dollar_deficit's picture

Its amazing that people still go to the movie store these days (much less buy the actual DVD). So many easy options out there - Netflix, Comcast, Xbox Live, PSN, etc.

Sun, 05/02/2010 - 21:39 | Link to Comment kurt_cagle
kurt_cagle's picture

Blockbuster's entire business plan was predicated upon the ability to provide a lower cost alternative to directly purchasing videos from the studios, that had place a price on them that reflected the theatre ticket mentality assumption that the average person would watch the same movie perhaps 10-20 times over the lifespan of the VHS tape (pushing the price of new videos released well into the $60-$100 price range). Given the cost of VHS acquisition and replication, this was almost pure profit. Blockbuster purchased in bulk, getting a 45% discount or thereabouts, charged $7-$10 per video initially, and was able to extract a healthy portion of that profit for themselves, as well as being a market maker for movies.

Fast forward three decades. Netflix, et al, did the same thing to Blockbuster, Movie Gallery and the other video places that these had done to the studios, but the margins by that time were much smaller, the potential of sophisticated piracy is far higher, and the means of dissemination have effectively bypassed physical media altogether. What I find astonishing is that this particularly train wreck has been coming for some time, but the video superstores continued to blindly believe that their business models were still viable (and are now astonished at how rapidly their businesses are disintegrating under the digital assault). 

Sun, 05/02/2010 - 22:57 | Link to Comment FrankIvy
FrankIvy's picture

I live in po-dunk.  A good man and a friend wanted to start a video store "downtown," in an area with a population of a few thousand.  Rent is dirt cheap, etcetera.

This was about 2 years ago.  I said something along the lines of - "it will be hard to compete with Netflix."

He asks, "what's Netflix?"

Gulp.  He told me just the other day that business is really bad.

As for Netflix, assuming that the economy would stay on the cliff for a few more years, which it won't, Netflix's "use by" shelf life might be 5 years.

After that, were we not crashing and burning overall, it's going to be mostly streaming, and "DVD" players will simply be devices for receiving and compiling the data stream to forward to the TV.

Netflix has decent on-line streaming, but the Movie Companies will eventually figure out that it's in their best interest to deal directly with the consumer.

Sun, 05/02/2010 - 23:31 | Link to Comment Cursive
Cursive's picture

So IYR should be up 10% or more tomorrow?  CRE and residental housing are buys!  Paging Wangerama....

Sun, 05/02/2010 - 23:45 | Link to Comment jeff montanye
jeff montanye's picture

goldman sachs credit partners lp is cited in the sec filing for early 2007.

Mon, 05/03/2010 - 01:32 | Link to Comment pcrotty41@hotma...
pcrotty41@hotmail.com's picture

Better get some REIT's while you still can...KIM, DDR, FRT, etc...this should push prices up another 10% in that sector as you know CRE is blazing hot...NTFLX should be up another 15% tomorrow on this news as well.

Mon, 05/03/2010 - 13:10 | Link to Comment Haywood Jablowme
Haywood Jablowme's picture

@weld1

"hey tyler take it easy on unions...we are the last stand for fair wages in this country. sure we got a little break here and there... FINALLY. remember that we are the people who brought you the weekend. we set the standard for wages all over the country to some degree.blue collar and white collar. we are not the ones without health insurance everyone is paying for, like it or not. we have our problems,but everyone cannot work for slave wages. people should hope we are around for a long time."

 

you gotta be fuckin' kiddin' me....

Meanwhile garbage truck drivers are rakin' in $109k in Seattle not because they're throwing toxic trash away as they wear their NBC approved gas masks but are deserving of that pay because I forgot they jump off a 20 story building, do a 360 flip through a blazing ring of fire, and finger roll your trash into the back of the truck all while being chased by a pack of Raptors from Jurassic Park in mid-flight. 

Bitch please.

 

 

 

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