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Movie Gallery files for Chapter 11 bankruptcy

18 October 2007 0:16 by Rich "vurbal" Fiscus | 6 comments

On Tuesday, Movie Gallery, the second leading brick and mortar video rental chain in the U. S., filed for Chapter 11 bankruptcy (reorganization) protection, hoping to turn around an operation having problems competing with online movie rentals from both Netflix and Blockbuster. Late in the day the company received court approval to access $140 million dollars of financing in order continue paying employees and vendors.

"The company intends to work with its constituencies to exit bankruptcy as expeditiously as possible, while executing on its reorganization plans," said Movie Gallery.

Besides online DVD rental, Movie Gallery must also compete with Blockbuster in the world of traditional brick and mortar rental operations. Two years ago both companies were competing to buy the Hollywood Video chain, a competition which Movie Gallery eventually won. Blockbuster's biggest problem at that time was a poor showing before the FCC when they attempted to prove there were no monopoly concerns in play. Two years later, as Blockbuster loses money competing with Netflix and Movie Gallery is closing stores and filing for bankruptcy, that issue seems a little less salient.

Depending on how much success Movie Gallery has at righting their ship, the legal questions may give way to practical concerns. Looking at whether brick and mortar stores are in the same market as online rentals could be replaced by questioning whether they can even compete in the market.

With the growth of the DVD rental kiosk industry, as well as alternate delivery methods like internet downloads and Streaming, it may be time for large chains to either find a new business model or fall aside as other companies do. Blockbuster has already shown that given the ability to survive substantial losses, it's possible to make a dent in the Netflix customer base, but whether Movie Gallery will position themselves for a similar move, or in fact whether such a plan would ultimately lead to profit, has yet to be seen.

Source: PC Magazine

Permalink to this article

Redbox continues fast paced expansion (29 January 2008)

Netflix is still in charge and Movie Gallery is still in trouble (23 January 2008)

Movie Gallery moves forward with reorganization plan (29 December 2007)

Former Hollywood Entertainment CEO wants his company back (13 December 2007)

Blockbuster to challenge Redbox in kiosk market (28 November 2007)

Redbox claims number one spot in U.S. DVD rental locations (27 November 2007)

Religious group says FCC may kill their broadcasting (20 November 2007)

FCC looks to deregulate cable companies further (12 November 2007)

Blockbuster hopes to compete with Netflix by not competing with Netflix (10 November 2007)

Blockbuster reports show Movielink as failed business (28 October 2007)

Blockbuster hopes to make a success of Movielink (26 October 2007)

New download service is advertising with blinks (23 October 2007)

Blockbuster is saving money but losing subscribers (4 October 2007)

Movie Gallery forced to close over 500 stores (25 September 2007)

Netflix streaming service gaining popularity (4 September 2007)

Movie Gallery expresses "substantial doubt" as to whether it can continue to operate (12 August 2007)

Blockbuster gets new ammo in Netflix battle (9 August 2007)

Blockbuster changes prices to become profitable (26 July 2007)

Netflix customer base erodes in second quarter (24 July 2007)

Movie Gallery to offer online DVD rentals (19 March 2007)

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Discuss this article!
Tecbot (Newbie) 18 October 2007 16:26
Wow I have like 10 free rentals left from there I better use them before that place shuts its doors in my city. [ + quote]
tleewade (Newbie) 19 October 2007 10:56
they raised the price up so much that the last time i rented a movie i told them that i wouldnot rent any more from them . that was 2 months ago .the last rental i got tax and all was 4.19 . this is in ga. to high [ + quote]
jjamez (Newbie) 22 October 2007 16:53
Yah and as of last week Hollywood Video also got rid of their $1 credit for next-day return (instead of being due in 5 days)! I might as well move all my rental business to the stand-alone kiosks in grocery stores for the $1.49 (.99 on Mondays) instead of the almost $5 per rental at Hollywood! [ + quote]
borhan9 (AfterDawn Addict) 23 October 2007 8:31
*Quote:* Movie Gallery files for Chapter 11 bankruptcy Its a sad day when this happens RIP Movie Gallery. [ + quote]
7thsinger (AfterDawn Addict) 26 October 2007 13:24
They should've known it was coming. Almost five bucks for a movie when you can get pretty good deals through netflix with no hunting or browsing. It's a sad day though...saying goodbye to a store than i spent years frequenting. Moment of silence please................................................................ Hope they have a stellar movie closeout when the local store drops! [ + quote]
lumberbee (Newbie) 27 October 2007 18:08
Downloaded a few movie from Spunway.com and found the quality in Dvix format and speed from one source was great and for a dollar, the new movie releases are up to date. It seemed to be very good, for an online movie rental site, It will probable give those big guys like Netflix and Block Buster a run for their money. It might be something to come. The movies seem to be around 650MB. And they just started their adult site Spunway.net direct downloads of movies. I'm surprised how many movies they have now from Spunway.com . still just a dollar a movie , it might make some heads turn!? ....Spunway will blow these guys out of the water, the is no way that they could compete and have any thing close to what Spunway has. Movielinx and Total access , according to independent auditor PricewaterhouseCoopers, Movielink's track record raises "substantial doubt about the company's ability to continue as a going concern." The serious impact with comsumers will be from Spunway. A dircet downloadable movie for a buck. That will make waves! mic [ + quote]