The ratings on Dallas-based Blockbuster Inc. reflect its participation in the declining video rental industry and the extremely competitive home entertainment market, its operational challenges as the company diversifies its distribution channels, its dependence on decisions made by the movie studios, and its highly leveraged capital structure that limits cash flow protection. Blockbuster's rental revenues reflect the declining industry trend as the company generates more than 70% of total sales from rentals. Revenues fell 5.4% for the quarter ended June 30, 2008, as a decrease in the number of company-operated domestic stores and the sale of 217 Gamestation stores in the second quarter of 2007 offset growth in game sales from increased next-generation hardware penetration and slightly positive same-store sales
