Blockbuster the huge rental chain of DVDs and video games, which has 528 stores at present have gone into administration. For over 15 years, the operation of UK Blockbuster has been struggling to make a profit consistently and yet they have been still charged with royalties at almost £78m, which covers the usage of Blockbuster brand, its IT system and rights.
This royalty payment and unreasonable tax arrangements introduced by multinational corporations like Amazon, Starbucks and Google has been the subject of heated political debate lately. A professional in the industry specifically pointed out that while Blockbuster UK’s royalty reached about £5m annually, which undoubted lessened the Britain group’s tax cost, it is not abiding by the arrangement of lowering the overall group’s tax bill. David Cameron promised to make sure that firms will pay their fair share in the future.
An administrator from Deloitte announced their plans of closing 129 branches of Blockbuster. 31 of their stores which have around 155 staff between them are also due to close, while their other shops are still uncertain. This could mean that about 4,500 staff will be out of work. The multinational parent group of Blockbuster had already filed for protection against bankruptcy in US 3 years ago, which emerged in 2011.
Dish, a US satellite broadcaster, has since then been struggling trying to save the group’s fortunes and finally gave up on backing the UK operation just last week. Now, they are looking for a new backer who can bring a stability to the core of the UK business.
There are also other global businesses that pay royalties to US parent companies for rights to use the brand but payments like these are difficult to justify when it seems as if the rights are doing little to enhance the UK divisional performances in terms of profit.