U.S. videogame retailer Game Crazy is expected to lose more than 200 locations following a Chapter 11 bankruptcy protection filing made today by its parent company Movie Gallery.
It's the second bankruptcy filing for Movie Gallery, the second-largest movie rental chain in North America, since 2007. The company has been battered by competition from both industry big-dog Blockbuster and Netflix, which offers direct-to-home movie rentals through the mail.
A floundering movie rental chain may not be of any great interest, but Movie Gallery also happens to be the parent company of Game Crazy, which is facing its second big round of store closures in six months. In September 2009 Movie Gallery announced that it was pulling the plug on roughly 200 of Game Crazy's 680 locations in a bid to remain solvent; the exact number of closures resulting from the Chapter 11 filing was not revealed but 250 stores are slated to remain open, which would indicate that more than 200 of the operations that survived last year's cut aren't going to make it this time around.
Movie Gallery claimed that the steps it has taken over the past two years to confront the "economic and competitive realities facing its business" were insufficient to keep it afloat, leaving the Chapter 11 filing the only practical option. The company plans to emerge from bankruptcy protection with a "new and sustainable business model centered on a smaller base of profitable stores."
It's bad news for employees at the condemned locations but shouldn't have much of an impact on the industry as a whole. Commenting on the 2009 closures, Sterne Agee analyst Arvind Bhatia said Game Crazy held only one to two percent of the videogame retail market, not enough to provide anything but the slightest boost to competitors like GameStop. It could be a potential gold mine for bargain-hunting customers, however; the 2009 closures resulted in major liquidation sales at the closing locations and it's very likely the same will happen this time around.