Movie Gallery Filing Bankruptcy, Will Close Hundreds of Stores

Brick-and-mortar video rental stores may be on their last reel, and some experts are wondering if the closing credits are next.

Movie Gallery, Inc. is filing bankruptcy, citing competition from a host of other video sources, including streaming video, DVD rental kiosks and online mail-in rentals, reports the St. Louis Post-Dispatch.

The company operates the Movie Gallery, Hollywood Video and Game Crazy stores. Although the company isn’t filing Chapter 7 bankruptcy, it plans to immediately close 760 stores nationwide.

This is the second filing in three years for the company, reports the Financial Times, and with the store closings it will now operate fewer than2,000 stores. That’s less than half of the number they operated in 2007 when they first filed bankruptcy.

The Post-Dispatch reports that the company has fewer than $50 million in assets against more than $500 million in debts.

Movie Gallery’s revenue fell by about $600 million last year compared with 2008. For the last quarter of the year, the company lost almost $130 million.

These losses come as some of Movie Gallery’s main competitors seem to be getting stronger.

Netflix, an online and mail-in movie rental company, grew its customer base by almost 3 million last year. RedBox, the company specializing in kiosks that rent DVDs for $1, saw its profit double to around $750 million last year, the Financial Times reports.

So the big question for Movie Gallery employees and customers: Is this the start of a new chapter in the company’s life or the beginning of the end? A company release said:

“Movie Gallery’s goal is to emerge from the restructuring process with a new and sustainable business model centered on a smaller base of profitable stores.”

But only time will tell if this story has a happy ending.