Domestic Operations

Physical Delivery
• In−Store—As of January 3, 2010, we had 4,018 stores operating under the BLOCKBUSTER ® brand in the United States and its
territories. Of
these stores, 493 stores were operated through our franchisees. Our stores offer movie and game rental and new and traded movie and
game
product to our customers as well as consumer electronics. Additionally, 358 of these locations include additional branding as game
concept
stores operating under the GAME RUSH® brand. In 2009 we introduced Direct Access, which allows in−store customers to access our
by−mail
inventory and have a movie shipped directly to their homes. Also, in 2009, we launched the Blockbuster app for iPhone, which allows
customers to browse our complete catalog of movies and television shows, check real−time store inventory, locate stores and build and
manage
their online rental queues.
• By−Mail—We offer an Internet−based subscription service through blockbuster.com that allows customers to rent DVDs by mail and
offers
substantially more titles than our individual stores, including a wide array of both new release and catalog DVDs. This allows us to reach
customers located in geographic areas where we do not have store locations. Subscribers of our BLOCKBUSTER Total Access™
program
have the benefit of:
• over 95,000 movie titles;
• two ways to get movies with no due dates—online and in−store;
• browsing movies and managing online queues through our iPhone application;
• a variety of plans to meet our customers’ lifestyle and budget needs;
• the convenience of thousands of participating store locations; and
• video game rentals in select markets beginning in 2009.
• Vending Kiosks—In 2008 we entered into an agreement with NCR to begin a Blockbuster branded vending kiosk business which
offers
customers a cost effective opportunity to rent DVDs at a lower daily rate. The machines currently offer DVD rentals but will allow for
future
applications, including digital downloads, and other services, such as sales of DVDs and video games. As of January 3, 2010, we had
2,225
kiosks operating under the Blockbuster brand in the United States and its territories.
Digital Delivery
• Download to PC—During 2008, we integrated our Movielink, LLC (“Movielink”) offering with the blockbuster.com website.
Movielink is an
online movie downloading business with one of the largest libraries of digital content for both rental and sale, which we purchased all the
outstanding membership
2
Table of Contents
interests of in 2007. This has allowed us to capitalize on the filmed entertainment downloading market and provide additional
entertainment
delivery choices to meet our customers’ needs including 24/7 access to their blockbuster.com account for downloading and watching
movies as
well as movie recommendations and reviews.
• Consumer Electronics—We are committed to providing convenient access to media entertainment and are continually seeking out
alternative
methods to deliver on this mission. With the convergence of media content and electronic devices, we continue to explore further
opportunities
to digitally deliver content to our customers, and leverage strategic partners to digitally deliver entertainment content to our customers’
homes
and electronic and portable devices. During 2009, we:
• launched BLOCKBUSTER On Demand through strategic alliances with Samsung and TiVo;
• announced a partnership with Motorola to bring BLOCKBUSTER On Demand to mobile devices;
• introduced our iPhone app, which allows customers to search and browse our product catalog, locate stores, lookup store inventories
and manage their by−mail queues; and
• launched a Blockbuster−branded video−on−demand (“VOD”) service with Suddenlink Communications, a top cable broadband
company.
We operate in a highly competitive environment. We believe our most significant competition comes from (i) retailers that rent, sell or
trade movies
and games; (ii) providers of direct delivery home viewing entertainment or other alternative delivery methods of entertainment content;
(iii) piracy; and
(iv) other forms of leisure entertainment. In addition, many consumers maintain relationships with several different in−home
entertainment providers and
can shift in−home entertainment spending from one provider to another.
Competition with Retailers that Rent, Sell or Trade Movies and Games. These retailers include, among others:
• mass merchant retailers, such as Wal−Mart, Best Buy and Target;
• Internet sites and companies that rent or sell movies, games and other entertainment content, such as Netflix, Apple, Amazon, Gamefly
and
others;
• supermarkets, pharmacies and convenience stores, including kiosks, such as those operated by Redbox;
• toy and entertainment retailers; and
• local, regional and national video and game stores, such as GameStop and Movie Gallery.
We believe that the principal factors we face in competing with retailers that rent, sell or trade movies and games are:
• consumer preference between purchasing and renting movies and games;
• alternative product distribution channels and the perceived convenience and ease of use of such alternative channels to the customer;
• pricing;
• convenience and visibility of store locations;
• quality, quantity and variety of titles in the desired format;
• customer service; and
• value−added services, such as movie search capabilities, ratings and recommendations and community features.
Competition with Providers of Direct Delivery Home Viewing Entertainment or Other Alternative Delivery Methods of Entertainment
Content.
We believe that competitive risks to our business include direct broadcast satellite, digital cable television, high−speed Internet access,
TiVo/DVR and other
alternatives for delivering videos and entertainment content to consumers. These providers offer an expanded number of conventional
channels and
expanded programming, including sporting events, through these services. Direct broadcast satellite, digital cable and “traditional” cable
providers not only
offer numerous channels of conventional television, they also offer pay−per−view movies, which permit a subscriber to pay a fee to see a
selected movie,
and other specialized movie services. Many digital cable providers, Internet content providers and other companies also provide
“video−on−demand,”
which transmits movies and other entertainment content on demand with interactive capabilities such as start, stop and rewind. In
addition, some cable
providers allow a subscriber to purchase a DVD movie and watch it over the cable system while the DVD is shipped to the subscriber.