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Brick-and-mortar movie and game rental chain Blockbuster has told major Hollywood studios that it’s preparing to file for bankruptcy next month despite several pushes to expand into online and kiosk services, the Los Angeles Times reports.

Sources close to the deal said the Dallas, Tex.-based company could file for bankruptcy as early as mid-September after executives met with six major movie studios to discuss their intent to enter a “pre-planned” bankruptcy.

Despite efforts to drive into the areas that made Blockbuster’s main competitors — Redbox and Netflix — so powerful, Blockbuster has hemorrhaged a lot of money in recent years. The company lost $558 million in 2009 and $374 million on 2008 alone, according to its most recent 10-K filing with the Securities and Exchange Commission.

Compare that to its primary rival, Netflix, which offers a way to rent physical copies and stream movies online — Netflix’s yearly income has grown year-over-year for four years now, from $49 million in 2005 to $115 million in 2009, according to its most recent 10-K filing.

Blockbuster is probably hoping to find an easy way to shed its nearly $1 billion in debt. It had already closed 507 underperforming stores and renegotiated leases with 673 of its 3,425 stores in an effort to help bolster its cash levels.

[Photo: Scott Clark]

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