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The question is not if Blockbuster will fold, but when.
The Dallas-based movie rental chain has struggled mightily against upstarts Redbox and Netflix, but Wall Street is openly predicting that the home entertainment veteran is headed to the movie palace in the sky. Blockbuster recently made a list of brands that analysts think will vanish by the end of 2011, according to 24/7 Wall St.
The company is laboring under nearly $1 billion in debt, a number that's been growing steadily since 2004, much of it stemming from a dividend the company paid out following its split with Viacom. At the time, Blockbuster was recording profits of $500 million.
In a sign of how far Blockbuster has fallen, the company recently de-listed from the New York Stock Exchange with shares trading at less than $1. 
True, it was granted a stay of execution at the beginning of July, when bondholders gave the company a six-week extension on a $42.4 million interest and principal payment.
But the last-minute shuffling seems moot.
The rental company already has closed 480 locations, and projects to have 3,500 stores operating by the end of the year, roughly half the number it fielded just three years ago. Blockbuster also quietly reintroduced late fees in March, after a disastrous 2004 decision to do away with them in order to compete with Netflix.
Prior to that, overdue fines accounted for 10 percent of the company’s business.
“I see Blockbuster following Movie Gallery into bankruptcy within two or three years,” Thomas K. Arnold, publisher of Home Media Magazine, told TheWrap, “They’ve done some smart things and [Blockbuster CEO] Jim Keyes is a smart guy, but sometime you just can’t win. Everything they do, somebody else does better."
“Their biggest issue is not the debt, it’s that consumers are renting movies from other sources,” said Edward Woo, an analyst with Wedbush Morgan Securities. “Even without the debt they’d be in a precarious position, because Netflix has the momentum. They’re losing customers, so they’d get to this place eventually.”
Blockbuster has long maintained that its brand recognition would help it weather this fiscal free-fall. To that end, it has lent its name to cell phone companies T-Mobile and Motorola for an OnDemand movie download service, and inched into the kiosk business with NCR Corp. NCR invested $60 million in the business, to get 10,000 kiosks up and running, all bearing the Blockbuster logo. Blockbuster gets a licensing fee for these co-productions, but the exact terms of the deals are not known.
Name recognition is what attracts NCR and others, but some members of the home entertainment industry maintain that Blockbuster’s brand now is actually intertwined with its downfall. They argue that Blockbuster is too firmly associated with renting physical discs, making it appear ill-equipped for the digital age.
“They’re an anachronism seen as a throwback to the rental era,” Arnold said.
