Stephen Foley: From Blockbuster to bust?

US Outlook: There is an air of the surreal surrounding the Blockbuster annual meeting in Dallas on Thursday.

Shareholders are waging a battle royal over whether an activist investor, Gregory Meyer, should get a seat on the board, to help turn round the ailing DVD rental firm. But the fate of this company is already well out of the hands of shareholders. It is already in talks with bankers about managing a bankruptcy filing, something that is actually long overdue.

A Chapter 11 bankruptcy will be the quickest way to rip up thousands of real estate contracts which tie the company into a network of throwback high street stores, in an era where people get their DVDs through the mail (Netflix is likely to overtake Blockbuster in the US this year in terms of volume business) or by streaming them over online, or by illegally downloading them.

Blockbuster's chief executive, Jim Keyes, trumpets his experience in turning round the convenience retail chain 7-Eleven, but Blockbuster is a different order of problem. People were never going to switch to downloading chocolate bars from the internet.

There is also the threat from Coinstar's network of kiosks, which dispense DVDs from a hole in the wall. Who needs to browse shelf after shelf of titles when you can do that on the net at home and just pop out to pick up the title of your choice?

By April, at its last results, Blockbuster had six months money left and was recording sales declines of 7.8 per cent in the US. After three years at the helm, Mr Keyes has not been able to move Blockbuster into this new era fast enough, and as ever it is the property legacy that has hampered his ability to reshape the business.

In such dire circumstances, the shareholder meeting ought to be fiery, but the spectacle will be quite counterproductive given the sensitivity of debt talks. Sometimes it is admirable to see a company go down fighting. But not like this.