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Blockbuster Tops 2M Subs

4 Jan, 2007 By: Erik Gruenwedel

Citing “strong consumer appeal” for its Total Access online and in-store rental combined service, Blockbuster Inc. last week announced that its Blockbuster Online rental service had surpassed the year-end goal of 2 million subscribers.

Blockbuster said the online service member base was about 2.2 million — a significant increase from 1.4 million subscribers at the end of the third quarter.

Arvind Bhatia, director of research with Sterne Agee & Leach in Dallas, said the 2 million mark was significant because Blockbuster said it represented the break-even point for its online operations.

Bhatia said he was skeptical about Big Blue achieving the goal, considering the online operations previously had never added 500,000 paying subscribers in one quarter.

“I think what it shows is the potential Total Access has for them as an initiative,” Bhatia said. “If it can increase their subscriber base by this much, it shows there is an appetite out there for an online and in-store combined offering.”

In addition, Blockbuster announced it received clearance from Taiwan regulators to sell 128 franchise and company-owned stores there to a Taiwanese Web portal.

The potential sale of Blockbuster stores to Webs-TV Digital International was submitted to the Fair Trade Commission of Taiwan in November for approval.

The news at the time sent shares of the Dallas-based chain above the $5 mark for the first time in 52 weeks.

Blockbuster spokesperson Karen Raskopf said the Taiwanese stores will continue to operate under the Blockbuster brand. She said the company will not provide further details on the transaction until it is finalized.

Last month, Blockbuster CFO Larry Zine said the company would increase consolidation efforts abroad in 2007 after largely focusing on the U.S. market since 2005.

A company spokesperson confirmed reports the Blockbuster franchisee in Peru ceased operations last month due to increased piracy at the street level.

Blockbuster reportedly has about 2,600 international store locations — representing about 25% of overall revenue — operating in the United Kingdom, Brazil and Canada.Finally, four Blockbuster executives over the Christmas holiday collectively cashed in more than $1 million in stock options under prearranged trading plans, according to filings with the Securities and Exchange Commission.

Zine exercised 99,908 shares of common stock at $5.07 per share for $506,933.

Christopher Wyatt, who was EVP of international operations until his dismissal in July, exercised 47,825 shares for $242,664. Fellow EVPs Nicholas Shepherd and Frank Paci exercised 33,612 shares and 21,035 shares, respectively, for $170,547 and $106,731 each.

Blockbuster shares Jan. 3 closed up 6% at $5.61 per share.

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