Warner Bros., Blockbuster renew rental pact

Day-and-date rental window gives chain boost in marketplace

For Warner Bros. and Blockbuster, it's business as usual -- and that's a big deal.

The pair said Tuesday that Warners will allow Blockbuster to rent its films the day they are made available on DVD, giving the troubled chain a lucrative four-week head start over Netflix and Redbox.

The pact includes three of the four distribution methods Blockbuster engages in: on-demand digital delivery, its by-mail subscription service and the old-fashioned method of renting to consumers who walk into their dwindling store locations.

Blockbuster's dollar-kiosks also will rent new releases from Warners -- and every other studio -- the same day the DVD hits retailers. Those kiosks, operated jointly with NCR, were not part of Tuesday's or any other deal, so rules there could change. Redbox and Netflix, on the other hand, have agreed to wait 28 days before renting new-release DVDs from Warners.

The first tests to see how this new wrinkle in home entertainment windowing works to Blockbuster's advantage could be informative, given that they involve a couple of hit movies: "The Blind Side," which came out Tuesday on DVD, and "Sherlock Holmes," due March 30.

When Redbox and Netflix agreed to the 28-day moratorium, they did so to ensure a steady flow of product at a reasonable cost. In Blockbuster's case, insiders said its deal with Warners was expiring, so an extension -- with modifications -- was in order. To help heavily indebted Blockbuster stay afloat, the studio agreed to let Blockbuster keep more of the rental money upfront but pay more on the backend.

Insiders said the arrangement, which extends to the end of the calendar year, also doubles Blockbuster's in-store inventory of Warners titles.

Blockbuster raised the possibility of bankruptcy during its annual report last week, a revelation that knocked its stock down 29% in a day. On Tuesday, shares rose 3% to 33 cents.

Blockbuster has about $964 million in debt and about $189 million in cash. It lost $435 million during the fourth quarter.
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