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Low rentals bust Blockbuster

Shares close down 13%

DALLAS — Blockbuster said Wednesday that its first-quarter loss widened because of a soft market for movie rentals and heavy spending on its online rental program, which competes with Netflix. Shares of Blockbuster closed down 13% to $5.40 Wednesday, although the stock recovered to some extent in after-hours trading.

Chairman-chief exec John Antioco said the stores face “an extremely tough” sales climate but said Blockbuster’s online service will become profitable next year. Antioco said prices for online rentals may have to rise and that the chain may allow customers to rent movies over the Web without paying a monthly subscription.

In the first quarter, Blockbuster said its loss was $49.2 million, or 26¢ per share, compared to a loss of $4.7 million, or 3¢ per share, a year earlier. Analysts were expecting a loss of 16¢ per share in the three months ended April 1, according to a survey by Thomson Financial.

Revenue rose 5% to $1.47 billion. That beat the Wall Street forecast of $1.37 billion and last year’s first quarter, which saw sales of $1.4 billion.

Blockbuster said Total Access, its online service, grew to 2.8 million paying subscribers, up 800,000 during the quarter. Analysts said, however, that the online business was a bigger drag on earnings than expected, as the company spent heavily on advertising and built up inventories to meet demand for DVDs.

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