Blockbuster and Netflix Settle Patent Infringement Suit; Terms 'Not Material'

Video rental giants Netflix and Blockbuster Wednesday settled an April 2006 lawsuit in which Netflix alleged Blockbuster had infringed on its online video rental patent. Terms were not released, but Blockbuster said the settlement wouldn't have a material affect on its earnings. Netflix had no comment, but that didn't deter investors who sent shares higher by 6.45%, after being up nearly 9% at one point. Blockbuster shares fell $0.02 (0.5%). Blockbuster had counter-sued Netflix sayindg that it didn't invent its methods of renting videos online, and that the company was trying to monopolize the online rental business. Blockbuster also said it intends to alter its Total Access membership in order to "strike the appropriate balance between continued subscriber growth and enhanced profitability." Netflix boasts 6.8 million subscribers, to just over three million subscribers for Blockbuster's online rental service.

Sources: SEC filing, Wall Street Journal, Bloomberg, Bizjournals.com, MarketWatch, Reuters
Commentary: Blockbuster Hints At Price Rise For Total Access Program; Netflix Rises • Will 'Burn On Demand' Eventually Save Blockbuster? • Blockbuster Undercuts Netflix with Online-Only Plan
Stocks/ETFs to watch: Blockbuster Inc. (BBI), Netflix, Inc. (NFLX). Competitors: Amazon.com (AMZN), Apple (AAPL), Wal-Mart (WMT). ETFs: PowerShares Dynamic Leisure & Entertainment ETF (PEJ)
Conference call transcripts: Blockbuster Q1 2007 Earnings Call Transcript • Netflix Q1 2007 Earnings Call Transcript
Related: Netflix vs. Blockbuster Total Access

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