Movie Gallery, which operates over 4500 Hollywood Video, Movie Gallery, and Game Crazy stores, announced on Wednesday that it had received a 30 day extension from bondholders, who will now not act before September 30th in reaction to the company's failure to meet its debt covenants.  This follows by less than a week an extension by lenders of a $900 million restructuring loan, who have also agreed not to act before September 30th. 

The company's problems started in early July, when it went into default due to a second quarter loss of over $300 million.  It's suffering from competition with mail order rental operations run by Netflix and Blockbuster, with video on demand cable services, with other brick and mortar retailers, and with illegal downloads.

Some are predicting that Movie Gallery will end up in bankruptcy, closing stores, sold, or a combination of the above.  Widespread store closings would put an exclamation point on the consolidation of retail in the maturing DVD business, in which sell-through is dominated by Wal-Mart, and the brick and mortar rental business is in decline.