Things had been going very well for Virtual Studios for the first twenty years of their existence. As a smaller production company, they didn't have to worry about the massive production costs that a Hollywood blockbuster would attract, and so they were quite happy to finance and distribute smaller films. It was a business model that worked for them. In 2006, they decided to partner up with Warner Bros. to take their business to the next level. It turned out to be a fatal mistake.
Most of the failure can be attributed to the performance of one film - 2008's 'Bangkok Dangerous.' Nicolas Cage movies in the 21st century have been very hit and miss, and this one fell very firmly into the 'miss' category. Critically panned and seldom-seen, it racked up a massive loss for both Virtual Studios and Warner Bros. Warner had the reserves to soak it up. Virtual Studios didn't.