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The bankruptcy watch is on at Blockbuster , the movie rental company that reported first quarter losses of $65.4 million. So how did the once dominant company lose its power? And how is it that upstart Netflix was able to cut into Blockbuster's business so successfully? It wasn't all about a shift from DVD's and storefronts to digital delivery of films. Fast Company 's Austin Carr wrote recently about the management style of Blockbuster CEO Jim Keyes , and shared some sharp criticism from shareholders and business scholars: "Between the time Keyes took on the reins as CEO of Blockbuster and today, the price of Netflix stock is up 500% and the price of Blockbuster stock is down about 90%," says Greg Meyer, one of the company's largest shareholders, who is currently battling to gain a seat on the board of directors . Meyer, the former owner of kiosk company DVDXpress, drew a line in the sand Tuesday, threatening that if he's not voluntarily named to the board, he will launch an election campaign for a seat . "Investors in Blockbuster have been the victims of a massive destructive of shareholder value while Netflix shareholders have been beneficiaries of a very smart, focused, and visionary management team," Meyer tells FastCompany.com. "I think it would be more productive for Keyes to try to learn from the success of Netflix rather than criticizing this company which has executed consistently and managed to gain millions of highly loyal subscribers." Meyer isn't the only one voicing concern about the CEO. "Given that Netflix is dramatically outperforming Blockbuster, our belief is that [his] public criticisms are oriented to driving attention away from Blockbuster's poor performance relative to Netflix's accomplishments," wrote professors Duane Ireland, Michael Hitt, and Robert Hoskisson to me in an email, co-authors of Strategic Management: Competitiveness and Globalization . "These criticisms are quite unlikely to benefit Mr. Keyes or Blockbuster. If anything, we think these criticisms will prove to be counterproductive." "I think Blockbuster is teetering on the brink," added professor Hitt, who guesses Keyes's vocalness derives from internal power politics. "This company could soon possibly be another Polaroid." Read Is a Brash Management Style Behind Blockbuster's $65.4M Quarterly Loss? here .

The Guardian's Paul Harris looks at California's predicament--climbing unemployment that is already the worst in 7 decades, a teetering state budget, huge cuts in education and health care--and asks whether the Golden State might be America's first failed state. Harris writes: Some of the state's leading intellectuals believe this collapse is a disaster that will harm Californians for years to come. "It will take a while for this self-destructive behaviour to do its worst damage," says Robert Hass, a professor at Berkeley and a former US poet laureate, whose work has often been suffused with the imagery of the Californian way of life. Now, incredibly, California, which has been a natural target for immigration throughout its history, is losing people. Between 2004 and 2008, half a million residents upped sticks and headed elsewhere. By 2010, California could lose a congressman because its population will have fallen so much – an astonishing prospect for a state that is currently the biggest single political entity in America. Neighbouring Nevada has launched a mocking campaign to entice businesses away, portraying Californian politicians as monkeys, and with a tag-line jingle that runs: "Kiss your assets goodbye!" You know you have a problem when Nevada – famed for nothing more than Las Vegas, casinos and desert – is laughing at you. This matters, too. Much has been made globally of the problems of Ireland and Iceland. Yet California dwarfs both. It is the eighth largest economy in the world, with a population of 37 million. If it was an independent country it would be in the G8. And if it were a company, it would likely be declared bankrupt. That prospect might surprise many, but it does not come as news to Tuua, as she glances nervously into the warming sky, hoping her parents will not have to wait in the car through the heat of the day just to see a doctor. "It is so depressing. They both worked hard all their lives in this state and this is where they have ended up. It should not have to be this way," she says. The article is not all doom and gloom. Some think the economic downturn could force California to become a leader in sustainable communities, and with its history as an innovation center, this is not hard to imagine. Read Will California become America's first failed state? here .

Many a keyboard was pounded yesterday as bloggers, reporters, analysts, and countless others wrote about General Motors as it filed for bankruptcy. But in this day and age, a company doesn't need to just sit idly by while others write its narrative. GM is going straight to the hungry news consumer itself--with a new blog. GM's Fastlane Blog is allowing (pushing?) executives to communicate its restructuring plans with the general public--or at least the part of the general public that seeks it out. For example, CEO Fritz Henderson wrote a post yesterday in which he announced more interactivity: We’re committed to open communications and I am personally putting a high priority on transparency. One way we’ll do this is by launching a series of live web chats on this website. I’ll kick things off later this week for one hour on Thursday, June 4 at 3 p.m. EDT. Following me, a steady stream of GM leaders from throughout the company will host additional chats, about two a week, on whatever topics are of most concern to you. The blog is set up to compliment a site called re:invention , which is full of videos that tout the new GM approach.

A couple of weeks ago, we posted the news that mergers and acquisitions were down to start 2009 . But there is one type of merger and acqusition that is on the rise in this economy: those that are bankruptcy related. According to the Financial Times--which looked at data from Thomson Reuters for the report--there have been 67 M&A deals where the target company was in "bankruptcy of administration proceedings." This is the highest level globally since August of 2004, and, according to the FT, restructuring practitioners expect the number to keep going up: Among the highest-profile deals were those of Delphi , the US car parts maker that recently sold its brakes and suspension business to a Chinese buyer, and BearingPoint , the US technology consultancy that sold its government operations to Deloitte. Practitioners around the world forecast that the number of transactions involving distressed companies must rise further. “We’ve only just begun,” said Gregory Milmoe, a US restructuring partner at Skadden, the law firm. “Given the dearth of capital and the substantial increase in the number of companies that will be troubled, one would expect the M&A rate to increase dramatically.” The 34 bankruptcy-related M&A deals in March pales in comparison with the montly peak of 87 back in July of 2002. The majority of the deals have been in the United States and Japan, where bankruptcy rules allow companies to operate as they reorganize. The industrial and retail sectors have led the way, but the deals have not been isolated in those areas. See the breakdown below: Read the full article here .