The ratings on Blockbuster Inc. reflect the risks of operating in a mature and declining video rental industry, the company's dependence on decisions made by movie studios, its high leverage, and the technology risks associated with delivery of video movies to the home. These risks are partially mitigated by Dallas, Texas-based Blockbuster's dominant market position in the video rental industry and good cash flow generating capabilities. Industry fundamentals for the video rental market are weak, and Blockbuster's profitability is heavily dependent on that market. The company generated 65% of its total sales from its movie rental business in 2004, and its domestic rental same-store sales have been weak since 2001. Retail sales of videos have been growing faster than the
