Blockbuster Settles Fight With Netflix

LOS ANGELES, June 27 (Reuters) - The video rental chain Blockbuster said on Wednesday that it had settled a patent dispute with its rival Netflix that challenged Blockbuster's entry into online DVD rental. Blockbuster also signaled that the new business was taking a toll on its finances.

Although terms of the settlement were not disclosed, shares in Netflix jumped .26, almost 6.5 percent, to .78, while Blockbuster slipped 2 cents, to .20.

Blockbuster also disclosed in a securities filing on Wednesday that it planned to seek an amendment to its Aug. 20, 2004, credit agreement that would lower earnings requirements.

The company said in the filing that it planned to modify its popular Total Access plan before the end of the year to "strike the appropriate balance between continued subscriber growth and enhanced profitability."

Blockbuster has poured hundreds of millions of dollars into building and promoting its online service as in-store rental revenues decline in the billion rental industry.

Blockbuster will not make changes to its Web site or business model as a result of the patent lawsuit settlement, a spokeswoman, Karen Raskopf, said.

A Netflix spokesman declined to comment. Netflix sued Blockbuster last year, saying its larger rival had stolen its system for placing movie selections in a queue and its business method for charging subscribers a monthly fee to select and rent DVDs from its Web site.

Blockbuster countersued Netflix on fraud and antitrust claims and said Netflix's patents were so broad as to be unenforceable.

Terms of the settlement were confidential, both companies said Wednesday.

Legal experts had said that if Netflix prevailed in litigation, it could have forced Blockbuster and any other competitor in the fast-growing online rental industry to pay licensing fees or operate under a different model.