Blockbuster: What next for the retailer teetering on the brink of administration?

Will a protagonist save the day?

In movies, there’s usually a hero waiting in the wings, but experts believe it’s unlikely there’ll be a queue of potential buyers ready to swoop on this business. Restructuring specialists could be plotting a takeover just like earlier this year when restructuring firm Gordon Brothers snapped the retailer out of administration, taking 264 stores and flying in former HMV UK and Ireland commercial director Gary Warren as managing director.

“In a logical world Blockbusters should just be allowed to collapse as there’s no long-term future for it,” argues Neil Saunders, managing director of retail consultancy Conlumino. “But there’s always someone mad enough to invest in something who might think there’s a future in it or think they can make a short-term gain.”

A property sell off

Blockbuster still has 264 stores across the UK and some retailers may well be interested in some of them. After its collapse earlier this year, a number of retailers including Iceland Foods, Herons Foods and Frozen Value eyed up the retailer’s store portfolio. In the end it was Morrisons which had the golden ticket, snapping up 49 of the failed retailer’s shops in order to beef up its fledgling convenience store estate.

Saunders suggests Blockbuster’s remaining store portfolio might once again stoke interest from grocers. “Blockbuster’s stores tend to be local which tend to be great for those in the convenience sector as they’re on the look out to increase that space. However some stores will be good and some won’t be because they’ll be too small - so we’ll probably see some cherrypicking.”

One source close to the situation said after Morrisons snapped up the best stores, there might just be a handful left that are worthy of grabbing.

Reinventing the formula

With successful online DVD and streaming models from Netflix, iTunes, LoveFilm and Tesco’s Blinkbox, any potential owners might contemplate ditching its outdated physical model and shifting to online-only. So there is a chance the brand could be bought to launch an online only film offer.

Saunders says this shift could work but it “would require a lot of investment”. With other players such as Sky in the market and consumers already settled into using existing services online, attempting to shift consumer behaviour would prove difficult.

Killed off

Can the retailer be revived? The winding down of Blockbuster is a plausible outcome. Its new owners have failed to turn around the business and the DVD and games rental market is tough, with consumers increasingly signing up to online alternatives. As it stands, its business model is outdated.

Once again Saunders holds no punches: “No-one in their right mind would buy the business.”