The giant rental group Blockbuster is facing insolvency in the US; however, it will not affect the Australian operations, according to executives of the Franchise Entertainment Group, which owns the name in Australia.The video-rental chain in the US said last night that its annual report will likely contain a statement from its accounting firm indicating that “substantial doubt exists with respect to the company’s ability to continue as a going concern” due to illiquidity from declining cash flow.
In Australia, FEG Director Andrew Gardiner said, “We have no direct relationship with Blockbuster in the US, thank God. We pay them a license fee for the use of the name and access to some software. We will not in any way be impacted by their problems.”
Gardiner also confirmed that Blockbuster is currently working on the roll-out of a set-top box that will deliver content over an IP network in Australia.
Blockbuster US said it will continue to explore strategic and financing alternatives with its advisor, Rothschild, and will continue to close stores. The company shut 374 of its 7000-plus locations in 2009 and plans to close an additional 500 to 545 stores this year, including 253 that shut in January.
At the same time, it continues to roll out its Blockbuster Express kiosks, developed through an alliance with NCR, and expects to have at least 10,000 in place by year’s end.
In a statement accompanying its fourth-quarter and full-year results, chairman/CEO Jim Keyes acknowledged that “the next 12 to 18 months will remain challenging as we balance the secular decline of a single channel with the ascension of emerging channels, such as vending and digital.”
Blockbuster posted a net loss of $558.2 million for 2009. Revenues declined 20 per cent to $4.1 billion from the prior year, while same-store sales declined 15.6 per cent.
The company expects to file its 10-K with the US Securities and Exchange Commission soon.