The ratings reflect Blockbuster Inc.'s participation in the declining video rental industry, extremely competitive home entertainment market, operational challenges as the company diversifies its distribution channels, dependence on decisions made by the movie studios, and highly leveraged capital structure. Blockbuster's rental revenues reflect the declining industry trend as the company generates more than 70% of total sales from rentals. Revenues fell 5.7% for the quarter ended Sept. 30, 2007, primarily because of declines in rental revenues and merchandise sales. The decline in movie rental revenue reflects store closures. Game rental revenues fell by 10.1% as early adopters of next-generation game systems tend to buy rather than rent games. Margins remain pressured by additional product to support in-store exchanges and negative
