Movie Gallery Files for Bankruptcy

Last week, another bit of evidence appeared that supports the position that DVDs (and Blu-ray discs) should be put on the endangered list. Movie Gallery filed for Chapter 11 bankruptcy protection as it tries to find a way to deal with its growing debt. The company has more than 2,600 stores in the U.S. in the Movie Gallery, Hollywood Video, and Crazy Games retail chains. The company’s restructuring plan calls for closing 760 of those stores, or a bit more than a quarter of the total. The closures come on top of “closing several hundred underperforming stores across the country” according to the company press release, and that they “closing additional stores during the Chapter 11 process.”

This is the company’s second trip into bankruptcy, with the last one starting in 2007 and ending in 2008. According to an article in TWICE, the company had $1.4 billion in revenues for 2009, which sounds impressive until you stack it up against the $2 billion it collected in 2008.

Certainly it’s difficult to run a brick-and-mortar operation that competes with the NetFlix and RedBox juggernauts, but I also view this as the contraction of a market in general that is coping with alternate delivery systems for movies and other video content. The NetFlix streaming movie service and Hulu’s television episode delivery are sparking rapid growth of video delivery over the Internet. We still have a long way to go before the balance shifts from plastic discs to broadband connections, but the change is accelerating and this only makes the future for storefront operations such as Movie Gallery and Blockbuster that much more uncertain.