Blockbuster, Netflix settle patent infringement dispute
Terms of settlement confidential
By Cindy Spielvogel -- Video Business, 6/27/2007
JUNE 27 | Blockbuster reported in a regulatory filing that it has settled its pending patent litigation with Netflix.
Terms of the settlement are confidential, but the companies have agreed to have all claims dismissed, according to the filing.
Netflix had filed suit against Blockbuster last year, alleging Blockbuster had infringed on Netflix's patents for online rentals.
The filing also stated that Blockbuster is seeking to amend the profitability requirements in its credit agreement because of its “significant investments in its online business” along with “necessary flexibility to grow its share of the overall rental market,” including the “challenging in-store industry.”
The filing noted Blockbuster 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 that “will strike the appropriate balance between continued subscriber growth and enhanced profitability.”
Analysts have said the company probably is planning a price hike for Total Access.
Blockbuster said it expects the amendment to be consummated in July.
Blockbuster’s stock fell slightly from $4.22 to $4.16 in morning trading. Netflix stock rose from $19.52 to $21.20.
Blockbuster plans to close 282 stores this year, it said in a regulatory filing documenting a June 28 presentation to its lenders.
The company reported it closed about 290 stores last year, with 25% of the revenue from those stores going to other stores located nearby. The company expects similar results from store closings this year.
The company also said it expects the overall in-store rental industry to be down 13.1% in the first half, more than an initially expected 7.5%. But it said it expects home video revenues overall to be up in the second half due largely to higher box-office grosses for films being released on DVD then.
Blockbuster believes its online/in-store strategy will give it an increased market share in both categories.
