BLOCKBUSTER EARNINGS OFF 13%, REVENUES UP 20%

NEW YORK -- As predicted by analysts, Viacom here released first-quarter financials late last month that showed Blockbuster Entertainment, Dallas, had a 13% decline in earnings before interest, taxes, depreciation and amortization despite a 20% gain in revenues. Viacom attributed the decrease to advertising expenses on behalf of its market-share building campaign and a change in accounting procedures caused by the shift to revenue sharing.

ts. Blockbuster is opening more supermarket departments, including one in a store of Tops Friendly Markets, Buffalo, N.Y., and another in a store of H.E. Butt Grocery Co., San Antonio. It also bought 50 Videoland video stores from Video City, Torrance, Calif.; opened a new prototype store in Portland, Ore.; and is testing rentals of CD-ROM computer software in Austin, Texas, and Anchorage, Alaska.

The supermarket department test, which also operates in stores of Kroger Co., Cincinnati, and Harris Teeter, Charlotte, N.C., includes departments ranging from 1,000 to 1,800 square feet. In press reports, a Blockbuster official would not comment on results from the test except to say that it has enabled Blockbuster to open departments in locations where it would not otherwise have a presence.

The 50 Videoland stores are in Oregon and Washington and Blockbuster bought them for $16 million in a cash transaction. Video City said it expects to use the money to fund its continued expansion. Video City has grown from 18 to 143 locations since March 1998.

In the design of the new Portland store -- in Hollywood Entertainment's headquarters city -- customers see racks full of the newest video releases as they walk in the door. In most other Blockbuster stores, the new releases are on the walls.

Additionally, roving spotlights are used within the store, creating more show-business excitement. Although it is not the first Blockbuster unit using the new design -- one opened in Phoenix late last year -- it does indicate that the chain is moving forward with a plan to update its in-store image.

"We are not focused on what Hollywood or our other competitors are doing," said Karen Raskopf, senior vice president of corporate communications at Blockbuster. "We are trying to better satisfy our customers."

At Hollywood Entertainment, Kristin Horak, vice president for communications, said, "We think imitation is the highest form of flattery. This is our backyard. We still have a strong presence here."

Top 10 Supermarket Video Rental Titles

Last

Rank Wk Title (Wks Out)

A Bug's Life (1)

1 N Buena Vista $26.99

The Siege (1)

2 N Fox $107.37

Meet Joe Black (3)

3 1 Universal $107.37

I Still Know What You Did Last Summer (3)

4 2 Columbia $107.37

The Waterboy (6)

5 3 Buena Vista $108.97

Pleasantville (5)

6 4 New Line $107.37

Mighty Joe Young (5)

7 5 Buena Vista $24.99

American History X (3)

8 7 New Line $105.77

A Night at the Roxbury (1)

9 N Paramount $102.56

What Dreams May Come (7)

10 8 Polygram $108.97

N=New Week ended April 25

This chart, tailored for the supermarket video market, is based on information taken from more than 1,000 supermarket rental locations serviced by Ingram Entertainment, La Vergne, Tenn.