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September 15, 2011
Video rental chain Blockbuster Canada Co. is winding down operations after more than 21 years of business following a request by receivership firm Grant Thornton Ltd. (GTL) filed with and approved on September 7 by the Ontario Superior Court of Justice. GTL, which had already closed 150 of the chain's least-profitable stores in June, announced that it would immediately begin closing the remaining 253 operating stores - the majority of which are located in Ontario (120), Alberta (51) and British Columbia (27). The company announced a final clearance sale which began September 9, initially offering 25% off of videos and most merchandise. Blockbuster Canada gift cards and reloadable entertainment cards are no longer being honoured.
The formerly profitable Blockbuster Canada was an indirect wholly owned subsidiary of troubled US-based rental giant Blockbuster Inc. On March 31, 2010 it provided an unlimited guarantee of the obligations of Blockbuster US to Hollywood studios to ensure the continued supply of video product to it and its US parent. Blockbuster US filed on September 23, 2010 for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code and was purchased on April 11, 2011 by Dish Network. Through mid-January 2011, however, Blockbuster had racked up some US$70m in unpaid obligations to the studios, for which they demanded payment from Blockbuster Canada in February of 2011.
After being appointed receiver of Blockbuster Canada on May 3, 2011, GTL began consolidating stores and entertained offers for the purchase of Blockbuster Canada as a going concern. Reported potential buyers included HMV Canada and Rogers Communications, among others, though none could come to terms with GTL to complete the sale.
Video rental has never been the phenomenon in Canada that it was in the US, where it reached a 2001 peak of US$8.6bn in consumer spending before entering a long decline in the face of, first, the burgeoning retail disc market and, second, the rapid growth of alternate forms of rental (by-mail and later kiosk) and competition from other media (streaming video as well as the thousands of other Internet- and gadget-based 'time-wasters' that prevent sitting down to a good movie for an evening.)
That may be good news for traditional store-based rental outlets in Canada, however: Blockbuster Canada was rolling along fine, profitably, until put up against its US parent's tab with studios and likely would be operating today without difficulty otherwise. Neither Netflix nor UK-based Lovefilm have launched by-mail rental in Canada (although the former launched a streaming-only service in the country in 2010). Local by-mail operators such as Zip.ca, Rogers Video Direct and CINEMAil have barely begun to take off in the country and so far have not encroached on the traditional rental business to the degree that subscription services such as Netflix (40% share of US rental spending in 2010) have punished US rental stores and kiosks (21% share).
The closure of Blockbuster Canada removes some 400 stores from the mix. Most of these are in the vicinity of rental stores, whether national/regional chain or independent operators, that are still operating and will likely pick up a good deal of business from the loss of the neighbourhood Blockbuster.
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