Netco's agree to dismiss all litigation

Blockbuster has settled a yearlong patent dispute with rival Netflix over online rentals, a growing focus for the vidtail chain.

Dallas-based Blockbuster disclosed the settlement in a SEC filing that also signaled changes to its Total Access program linking online and in-store rentals by year’s end.

In a lawsuit filed last year, Netflix alleged that Blockbuster had infringed on Netflix’s patents for online rentals. Blockbuster countersued, accusing Netflix of seeking a monopoly in the online rental market.

Both companies have agreed to a dismissal of all litigation. Terms of the settlement were not disclosed.

Blockbuster also indicated it expects to have lower earnings than is required by a consortium of its lenders due to heavy investment in the Total Access online program. The company is therefore seeking to amend the credit agreements to allow for lower EBITDA, according to the SEC filing.

Blockbuster said it expects the amendment to be consummated in July.

The chain has already invested significantly in Total Access in the first half and plans to make unspecified “modifications” to the program by the end of the year, the filing stated, referring also to the “challenging in-store industry.”

Analysts have said the company is probably planning a price hike for Total Access.

Blockbuster’s stock fell slightly Wednesday from $4.22 to $4.20. Netflix stock rose from $19.52 to $20.78.

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