Posted: Wednesday 16th January 2013 at 16:12 pm

Blockbuster enters administration

People walk past Blockbusters store (file photo 2010)Blockbusters has closed some branches in the past few years

DVD rental firm Blockbuster has become the latest UK High Street firm to go into administration after struggling against internet competitors.

The chain has 528 stores and employs 4,190 staff.

Deloitte, the accountancy firm which will now take over running the firm, said Blockbuster UK would keep trading while it tries to find a buyer.

Music chain HMV and camera-seller Jessops both went into administration earlier this month.

It is not yet known what will happen to HMV’s branches and 4,350 staff. Unusually, all of Jessops’ 187 branches closed within days of administrators being appointed.

January retail administrations

Branches Staff
Man walks past HMV sign

HMV

239

4,350

Jessops sign

Jessops

187

1,500

Blockbusters sign

Blockbuster UK

528

4,190

Electricals chain Comet collapsed before Christmas.

“We are working closely with suppliers and employees to ensure the business has the best possible platform to secure a sale, preserve jobs and generate as much value as possible for all creditors,” said Lee Manning, from Deloitte’s Restructuring Services practice.

“The core of the business is still profitable and we will continue to trade as normal in both retail and rental whilst we seek a buyer for all or parts of the business as a going concern.

“During this time gift cards and credit acquired through Blockbuster’s trade-in scheme will be honoured towards the purchase of goods.”

Store closures

The first Blockbuster store in the UK opened in south London in 1989, and the firm has sought to expand its services in recent years, including with a trade-in facility for pre-owned titles.

The firm launched an online DVD rental operation in 2002, and the company’s website, blockbuster.co.uk, claims to send out more discs per customer than other online DVD rental services in the UK.

However, this online rental market became increasingly crowded with rival services, and now the popularity of streaming films over the internet is growing fast.

Blockbuster UK has closed more than 100 outlets in the past few years.

Blockbuster went bankrupt in the US in 2011, but was rescued by US pay-TV provider Dish Network in a $320m (£200m) deal, which saved hundreds of stores from closing. The UK arm is also owned by Dish Network but run separately.

Before Blockbuster was bought by Dish Network, there were media reports of ambitious expansion plans, including selling electrical goods such as televisions, mobile phones, and iPods.

But business experts said Blockbuster’s problems were all too similar to those hitting other retailers – failure to adapt quickly enough to a changing business environment and consumer habits.

‘Altered landscape’

Professor Ajay Bhalla, of Cass Business School, said: “The company, like HMV, failed to transform its business model early enough. When it did, it found a fundamentally altered competitive landscape where the platform model had destroyed the traditional retail one.

“Firms like Blockbuster failed to face up to the enormity of the change and altered their business model on the fringes (eg selling second-hand products), rather than coming up with an innovative offering. It is shocking that the board and executive management failed to make bold choices.”

Dr Steve Musson, a lecturer at the University of Reading and an expert in the economics of UK cities, added: “The retail businesses that we have seen going into administration since Christmas have a lot in common – they have large numbers of stores and have struggled to adapt to changing retail habits.

“Rents for retail businesses are usually payable quarterly, with many landlords most recently asking for payment at the end of December, which is why we often see retail failures coming in clusters.”

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