As Blockbuster Gets a Brief Reprieve From Creditors, Shareholders Demand An Answer
It's been close to radio silence from Renaissance Tower for several weeks as Blockbuster tries to find "strategic partners" to keep the close-to-broke video giant-at-one-time out of the bankruptcy courts. But on Friday, Bloomberg reported that Jim Keyes and Co. will announce this week that they've been given a month-long reprieve from creditors "so the video-rental chain can prepare for a possible bankruptcy filing in September." Blockbuster ain't sayin' if it's so, so ...
On the other side's a letter Bronx bomber Niko Celentano sent to Blockbuster's board yesterday in which he and the 23 percent of shareholders Celentano reps demand an explanation: Writes Celentano, who also wants to know why Blockbuster's done a terrible job promoting its good news, "We believe to file a bankruptcy at this time, before ever realizing any of these future revenue streams, would be absolutely irresponsible to do."
In the meantime, a Friend of Unfair Park and Blockbuster shareholder deep in the entertainment-providing business, directs our attention to a Blockbuster-Comcast partnership: DVDsByMail, which went Beta this weekend. Wonders our Friend, "Surely Comcast is the 'major cable provider' mentioned by Blockbuster recently. Does this mean a deeper relationship with Comcast is near? VOD? Equity investor? Buyout? Waiting for BK and then buyout?" Maybe. But why not Kabletown?
Board of Directors
1201 Elm Street 21st Floor
Dallas, TX 75270
To the Board of Directors;
Today as I write you we have grown to 455 members, representing over 23% of the voting shares of Blockbuster. I am writing you today after reading an article that was released in Bloomberg on Friday August 6th. This article stated that Blockbuster would probably "receive a one-month reprieve from creditors next week" in order to "prepare for a possible bankruptcy filing in September". This article says it has "three people with knowledge of the matter". We did reach out to Patty Sullivan, the Blockbuster spokesperson, on Friday for comment on this article. Patty did provide us with a list of four questions that were asked by Bloomberg prior to the release of this article. When asked by Bloomberg that "this would give you time to prepare for a possible bankruptcy filing in September" there was no answer provided by the company. Reading this "non-answer" from the company would lead us to believe there is some truth to this story.
In our last correspondence with the company we went into detail about the future of the company. We want to make clear to the entire Board of Directors our feelings on future revenue streams and the turnaround that is underway at Blockbuster. We do believe that the 28 day window that Blockbuster has in place now on titles from some studios is having a positive effect. This positive effect is in light of almost no advertising at all on the part of the company, to let the consumer know the advantage the company has. We know once this advantage is advertised, it will have even more of an effect. We also believe the Movie Gallery liquidation will have a dramatic effect starting Q3 and going forward due to all the "brick and mortar" customers that will gravitate to Blockbuster.
With Blockbuster on Demand on 75 devices to date and expecting to be on "150 devices by the end of the year" we know that Blockbuster will be well represented in the future of Video on Demand. We are most excited about the Verizon Droid X that was released on July 15th and the Droid 2 which will be released on August 12th. We have already seen the sales numbers for the Droid X and this phone is currently sold out everywhere due to the tremendous demand for it. We also feel that revenue from the NCR kiosk deal will start to show beginning Q3 and increasing going forward. With 10,000 kiosks expected by the end of the year, we know this will add revenue to the bottom line with little or no cost to the company.
We do not understand the reasoning for the lack of press releases by the company explaining some of these exciting new deals. To date there has not been an official Blockbuster press release on the Verizon Droid X even with its tremendous success. There also has been no press release on the August 12th release of the Droid 2 which will have Blockbuster pre-installed on it. We have also learned about a Comcast/Blockbuster partnership in the By Mail business. This has gone into beta testing August 4th and can be referenced at www.dvdsbymail.com. We would like to know why these exciting new deals and partnerships have not been put out into the press to let consumers and investors know about them.
We want our position to be very clear to all of the board here. We believe to file a bankruptcy at this time, before ever realizing any of these future revenue streams, would be absolutely irresponsible to do. We know that both groups of bondholders have formed committees in order to negotiate with the company and protect their interests. At this time we, as a contingency plan, will be doing the same to protect our best interests. We believe a bankruptcy in any form will be unacceptable to us and we would have to take the steps required to fight it. We hope that the company will complete an out of court settlement here as your fiduciary duty demands it and would be in the best interest of all involved.
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