Columbia House Files for Chapter 11 Bankruptcy Protection

On Monday, August 10, Filmed Entertainment Inc., the owner of former mail-order music giant Columbia House, announced its plans to file for Chapter 11 bankruptcy protection. In its bankruptcy filing, the company is seeking to sell its remaining business assets following 19 years of declining revenue.

Columbia House parent company falls into debt

According to the statement of Filmed Entertainment Director Glenn Langberg in court documents, the company blamed almost two decades of poor performance on the evolution of digital music and technology that have begun to render compact discs and digital versatile discs obsolete. Likewise, the mail-order firm claimed that the expansion of the digital media industry along with the rapid growth of digital video streaming companies like Netflix and Amazon have significantly cut into Columbia House’s DVD sales.

In his court papers, Langberg cited that the confluence of market factors has changed the way consumers purchase movies and television, which led to the drop in Columbia House’s sales revenues to $17 million in 2013, down from its peak of $1.4 billion in 1996. Langberg’s claim was supported by a recent SNL Kagan report cited in the Wall Street Journal on the DVD market, which showed that sales have fallen more than 50 percent since 2006, with only $11 billion in revenues generated in 2013.

The company also claimed that Columbia House’s CD sales were hit, as the market declined to $1.85 billion in 2014, down from its peak in 2000 at $13 billion, according to the Record Industry Association of America.

Currently, the company lists total assets between $1 million and $10 million, and total liabilities between $50 million and $100 million owed to over 250 creditors. Approximately $30 million of that debt total is due to long-term pension liabilities, while more than $7 million is owed to unsecured creditors and film studios for royalty payments.

Columbia House’s restructuring plan

Filmed Entertainment has decided to sell Columbia House music and its DVD Clubs through an open auction process under section 363 of the U.S. Bankruptcy Code. However, the company is seeking approval from the bankruptcy court to maintain Columbia House’s operations throughout the reorganization process with its existing capital to maximize its value prior to sale. In court papers, the company claimed that Columbia House currently has no employees as it facilitates sales of its DVD business through third parties.

PricewaterhouseCoopers will serve as Filmed Entertainment’s financial and reorganization adviser as it seeks potential buyers. PWC officials claim that Filmed Entertainment received interest from 20 prospective buyers, and the firm is currently accepting bids.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.