As per the latest media reports, almost 40% of its stores would be shut down by Blockbuster Inc. over the next two years in a move to ease its competition with its new competitors, from which the company has been losing from quite some time now.

Earlier, the Dallas-based movie-rental company had mulled to shut down 1,000 stores; however, the number was increased on Tuesday to as many as 1,560, out of its total
3,750 retail outlets. While 300 of these will be transformed into outlets, another approx 300 are under the procedure of lease mitigation or termination efforts. The company made clear that via this move, it might be able to enhance profitability and save $26 million in working capital.

The recent years have witnessed Blockbuster coming under huge pressure due to entry of lower-cost rivals in the field. While Redbox, a unit of Coinstar Inc. rents DVDs for as little as $1 via its vending machines; Netflix Inc. offers a monthly subscription plan for about $9 for an unlimited number of mail-order rentals and online streams.

Since both the above mentioned companies are not pressurized with the heavy fees of leasing thousands of retail locations like Blockbuster, they are able to operate with lower costs.

Furthermore, the changes in people for consuming movies have also led to an adverse hit for Blockbuster.

A research conducted by Adams Media Research has specified, "Home-video sales are estimated to fall between 8%-10% this year, in part because people are spending more time with other types of entertainment such as the Internet."

As per the Blockbuster Chief Executive Jim Keyes, who termed the closings as a natural step following which the retail chain would roll out new ways to rent and sell its movies, said: "The Company has followed its competitors by launching mail-order rental, online and kiosk services. We're actually adding points of service rather than deleting."