Blockbuster is too big to fail
March 17, 2010
With recent reports that Blockbuster is about to declare bankruptcy on a debt load of roughly $1 billion dollars and interest payments of roughly $120 million a year, while bleeding $350 million a year on $1 billion of revenue it makes sense to bailout the company.
It’s an outdated business model with no clear path to success, which makes it very similar to many of the banks that received bailout money.
We argue that Blockbuster is too big to fail.
So far the stimulus package at a whopping $800 billion dollars has created at most a few thousand jobs and out of those few thousand jobs, very few of them are long term with most being just short term until whatever project is complete.
As of January 4, 2009, Blockbuster employed 58,561 persons, including 40,107 within the United States and 18,454 outside of the United States.
Of the total number of U.S. employees, 11,700 were full-time, 26,732 were part-time and 1,675 were seasonal employees.
IN other words, by bailing them out of their 1 billion debt load you will keep more full time jobs and more long lasting jobs than the $800,000,000,000 stimulus package did.
It’s a perfect Washington move, propping up a dead industry… but that being stated, the fact is that 40,000 Americans will be out of a job…. and it’s more efficient to keep that company in business.
Sure they will fail eventually anyway…. but that’s not the point.. the point is that most likely it will fail when this recession is over and other companies can pick up the unemployed.
So from that standpoint alone it makes sense to bailout Blockbuster, one of least innovative companies on the planet.
Enjoy our new reality.
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