Video rental chain Blockbuster Inc. (BBI) on Wednesday announced a partnership with TiVo Inc. (TIVO) to deliver Blockbuster's library of digital movie titles directly to the television set through TiVo digital video recorders. Also under the partnership, Blockbuster will sell TiVo DVRs at its stores nationwide as well as online at blockbuster.com, giving both companies new distribution outlets. Financial terms of the deal were not disclosed. The deal is expected to enable Blockbuster to expand its reach as it struggles to cope with the increasing popularity of online video.

The Dallas, Texas-based Blockbuster noted that the deal will make it easier for all broadband connected TiVo subscribers to download content offered by Blockbuster's OnDemand service. Blockbuster OnDemand, featuring content to both buy and rent, will be integrated into TiVo Series2 and 3 units, TiVo HD, and TiVo HD XL digital video recorders, or DVRs. The two companies also plan to implement a cross-marketing campaign to promote the new service.

The companies expect to have the Blockbuster OnDemand service integrated into TiVo DVRs in the second half of 2009. TiVo has 3.3 million subscribers, of which 1.6 million own standalone TiVo DVRs. TiVo users will be able to download about 10,000 Blockbuster titles. Most rental films on Blockbuster.com currently cost about $2 to $4.

Jim Keyes, Chairman and CEO of Blockbuster, said, We are excited to be teaming with TiVo, the company that created the DVR, to make Blockbuster's entertainment content readily available to their millions of subscribers. Ultimately, our vision is to work with TiVo so that their subscribers can access movies not only through our OnDemand service but also from our stores and through our by-mail service as well.

Tom Rogers, President and CEO of TiVo said, Joining with Blockbuster further distinguishes TiVo as a true universal solution for content providers, making it a one stop shop for any content thru broadband or linear distribution straight to the TV.

TiVo has already struck similar deals with Amazon.com Inc. (AMZN) and Blockbuster's online rival Netflix Inc. (NFLX) to make digital video services accessible from its set-top boxes. In October, Netflix teamed up with TiVo to enable subscribers watch movies or television episodes on TiVo digital-video recorders. Netflix makes about 12,000 film and television programs available on the Internet free to most of its subscribers.

Earlier this year, Netflix said viewers can instantly watch movies from Netflix on Vizio high definition televisions featuring the latter's new Connected HDTV Platform. Vizio expects to ship the new TVs to nationwide retailers later this year. In a prior announcement, Netflix said that LG Electronics Inc.'s high-definition TV sets would stream Netflix videos directly from the Internet without an additional device, while in August 2008, Netflix made a deal with Microsoft to stream video through the software giant's Xbox 360 gaming console.

Blockbuster, which operates more than 7500 movie rental stores worldwide, has been struggling to cope with the increasing popularity of online video and stiff competition from Netflix. The company has also been facing some liquidity issues for a while.

In mid-March, Blockbuster reported a net loss for the fourth quarter of $359.8 million, or $1.89 per share, compared to net income of $41.0 million, or $0.18 per share, in the same period last year, primarily due to a huge non-cash charge related to the impairment of goodwill and other long lived assets. Total revenues for the quarter declined to $1.38 billion from $1.57 billion last year. Domestic same-store sales for the quarter increased 4.4%, compared to a decline of 0.9% in the same period last year. Earlier in March, Blockbuster hired law firm Kirkland & Ellis LLP to help it raise capital and refinance debt amid the deepening recession.

The California-based TiVo was once a pioneer in DVRs, which allow viewers to record television programs to a hard drive. But the company has seen its market share erode as cable companies have integrated similar features into their own television set-top boxes. In addition, more people have turned to the Internet to watch movies and television shows.

In Wednesday's regular trading session, BBI is trading at $0.83, up $0.10 or 13.67% on a volume of 0.38 million shares. The stock has been trading in a range of $0.13-$3.68 in the past 52 weeks.

TIVO is trading at $7.22, up $0.24 or 3.44% on a volume of 14,600 shares. In the past 52 weeks, the stock has been trading in a range of $4.00-$9.25.

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