Iconic self-help, entertainment brand files Chapter 11 bankruptcy

A company that has helped so many people now seeks help with its own finances.

Jun 30, 2024 - 19:30

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The internet has quietly made a lot of things irrelevant.

How often do you mail someone a handwritten letter? That seems silly in the age of email, and while people still do it, actual mailed letters are more a gimmick than a way of keeping in touch with someone.

Digital delivery has also made printed books more an affectation than something people need. The same can be said of DVDs. They still exist, but it's hard to see a scenario where someone actually needs one.

The ability to download or stream pretty much any movie ever produced has made physical DVDs more of a souvenir than something people need. Big fans might buy their favorite movie, but the overall DVD business has pretty much disappeared.

It's not like the vinyl record business where Taylor Swift fans buy albums even though they have access to the same music on whatever streaming service they use. DVDs basically have no market other than rural areas without internet. That's a very slim market and a really bad basis for a business.

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The death of the DVD has likely played a big role in the demise of Redbox parent Chicken Soup for the Soul, which just filed for Chapter 11 bankruptcy filing.

Chicken Soup for the Soul is Redbox's parent company.
Image source: Getty Images

Chicken Soup for the Soul faces problems

Few people likely know that the publisher of the Chicken Soup for the Soul books also owns the Redbox DVD rental kiosk brand.

Chicken Soup for the Soul (CSSEZ) does not mention the connection in its About Us section on its website. The company went public in 2017.

"Today, 30 years after we first began sharing happiness, inspiration, and hope through our books, we still publish a new title every month. But we also have a podcast, educational programs, dog and cat food, and our entertainment business, which creates and distributes TV, film, and video content to consumers through our free Crackle, Popcornflix, and newly launched Chicken Soup for the Soul apps, among others," the company posted.

It does, however, also own Redbox, a brand it's actually disrupting with its free Crackle and Popcornflix streaming brands.

Redbox, which rents DVDs through kiosks, has more than 29,000 locations. That's a huge investment in rent for a business that keeps becoming less relevant.

And a financial albatross. The company bought Redbox in 2022 for $357 million in stock and debt.

It's a situation that has led to significant debt, problems paying employees, and a Chapter 11 bankruptcy filing.

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Chicken Soup for the Soul files Chapter 11 bankruptcy

Chicken Soup for the Soul Entertainment has filed for Chapter 11 bankruptcy in Delaware claiming both $500 million to $1 billion in debt and assets. The filing came after missing a week of paying its employees and failing to secure financing.

“Overnight we filed for Chapter 11 bankruptcy protection. In connection with the filing, we have applied for approval of a debtor in possession [DIP] loan. Upon court approval, we expect payroll to be funded early in the week and funding for this upcoming week’s payroll to also be secured. We also expect to have the funds to reinstate medical benefits back to May 14, 2024 and going forward. We will provide regular updates," the company shared in an email to employees.

The company has arranged for a DIP loan for up to $100 million to fund operations during the bankruptcy period.

More bankruptcy:

n addition to the financial burden of the transaction, the Hollywood studio pipeline was constricted by the dual strikes in 2023, only exacerbating the decline of physical disc rentals. A number of vendors and filmmakers had also gone unpaid, and some had filed lawsuits.

Chicken Soup for the Soul owes $46 million to U.S. Bank and more than $9 million to Sony, and BBC Studios respectively. Its back rent obligations are significant as well. It owes $5 million to Walgreens and over $4 million to Walmart.

"In an SEC filing earlier this month, the company said its net losses widened to $636.6 million in 2023 from $111.2 million in the prior year. The filing warned that bankruptcy was a potential outcome if the company failed to secure funding" Deadline reported.