Blockbuster tells Hollywood studios it's preparing for mid-September bankruptcy

August 26, 2010 |  3:56 pm

After dominating the home video rental business for more than a decade and struggling to survive in recent years against upstarts Netflix and Redbox, Blockbuster Inc. is preparing to file for bankruptcy next month, according to people who have been briefed on the matter.

Executives from Blockbuster and its senior debt holders last week held meetings with the six major movie studios to discuss their intention to enter a “pre-planned” bankruptcy in mid-September, said several people familiar with the situation who requested anonymity due to the sensitivity of ongoing talks.

Blockbuster is hoping to use its time in Chapter 11 to restructure a crippling debt load of nearly $1 billion and escape leases on 500 or more of it 3,425 stores in the U.S. Maintaining the support of Hollywood's film studios during the process will be critical so that Blockbuster can continue to rely upon an uninterrupted supply of new DVDs.

Not surprising, I suppose, considering how many of us get movies from the Internet, via such devices as my favorite magic box. If, in fact, Apple decides to toss its hat in the ring with an updated iTV device within the next two weeks, then this news is so coincidentally timed that you wouldn't believe it in the movie version of the story. Out with the old, in with the new?