Blockbuster delivers 2 mil subs

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Shares of Blockbuster Inc. soared to a 52-week high Wednesday after the company said that it has reached its goal of closing the year with 2 million paying subscribers to its online DVD-by-mail service.

The 6.6% surge -- the top gainer on The Hollywood Reporter's Showbiz 50 index -- to $5.64 on strong volume Wednesday gave Blockbuster, which boasts 8,000 movie-rental stores worldwide, a market capitalization of $1.1 billion. Its previous 52-week high was $5.59.

Netflix Inc., the company that invented the online DVD rental business and has no physical stores, sports a market cap of $1.8 billion.

Blockbuster jumped into online rentals in 2004, following years of dismissing it as a niche market and allowing Netflix to attract 5.7 million subscribers since its service was launched in 1999.

Netflix also advanced Wednesday, gaining 2.9% to $26.61. Netflix shareholders, however, have had little to cheer about lately, as the stock lost 4.4% last year after having gained 121% in 2005.

Blockbuster, hurt by the company's large debt and Netflix's success, had been on the decline since butting up against $30 in 2002. The stock meandered throughout most of last year before beginning a late-year ascent.

Some analysts have pegged Blockbuster's success to its new Total Access concept unveiled Nov. 1, where its online subscribers can return movies at Blockbuster stores as well as through the post office.

On Wednesday, Blockbuster CEO John Antioco also credited Total Access, saying that it "has translated into significant subscriber growth" that was "accomplished without any broadcast media except in a handful of test markets."

Antioco said the company added more than 500,000 subscribers to its online service in the fourth quarter. Netflix, which will reveal its fourth-quarter subscriber additions when it next reports quarterly financial results, is expected to have added about 600,000 subscribers in the period to reach 6.3 million.

Adams Media Research said that the U.S. online DVD rental market was at $1.7 billion last year and predicts that it will grow to $2.5 billion in 2010 when Blockbuster and Netflix combined, along with their smaller competitors, will boast 13.7 million subscribers.

"It's a fairly healthy growth rate, but less bullish than some," Adams Media Research president Tom Adams said.

The research firm also said that the digital download model is set to explode, and Netflix and Blockbuster will be players there as well. Last year, the purchase, rental and subscription digital download movie business was worth about $32 million in the U.S., and Adams said it will reach $2.8 billion in 2010.
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