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Studios may cut credit to beleaguered Blockbuster; bankruptcy considered

The once mighty video chain Blockbuster filed its annual report with the Securities And Exchange Commission Tuesday, and it turns out there may be bad news on the horizon for the company. As reported by LA Times, Hollywood studios are considering cutting off Blockbuster's line of credit for inventory. Says Blockbuster's report:

Given our liquidity limitations and uncertainty surrounding our ability to finance our obligations, we are currently in discussions with several of the large studios regarding the credit terms for our inventory purchases. If the studios tighten their credit terms or if studios eliminate their provision of credit to us altogether, this could result in up-front cash commitments that we may be unable to sustain on a long-term basis.

The report adds that Chapter 11 bankruptcy may be an option for Blockbuster (which posted a $434.9 million loss during the last quarter, not to mention closing 586 stores worldwide last year) should the studios go through with their credit-tightening. Or, if they were really serious about saving the company, they could just follow this sage business advice so generously offered few years back.

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