Blockbuster Hints At Price Rise For Total Access Program; Netflix Rises

Blockbuster (BBI) is feeling squeezed where it hurts - in the pocketbook. In an 8-K filing with the SEC Wednesday, Blockbuster disclosed that it plans to seek an amendment of its credit agreement with J.P. Morgan on behalf of its lenders “in order to facilitate Blockbuster’s continued implementation of its business strategy and to minimize the possibility that Blockbuster will be unable to comply” with the EBITDA requirements through the end of this year and with Fixed Charge Coverage and Leverage Ratio requirements during 2008.

The filing details the proposed EBITDA requirements through fiscal 2009, and proposed delaying the Fixed Charge Coverage and Leverage Ratio requirements for a year.

In the filing, the company also said that before year end it plans “to make modifications” to its highly popular Total Access subscription plan - which combines a web-based DVD by mail program with in-store rentals - to “strike the appropriate balance between continued subscriber growth and enhanced profitability.” That would sound like a price hike, don’t you think?

The company also has struck a settlement of pending patent litigation with Netflix (NFLX). Terms were not announced, but Blockbuster said the agreement would not have a material impact on future financial performance. Some stories will - and already have - attributed the rise in Netflix share price Wednesday to the settlement of the case. But it has more to do with the fact that Blockbuster basically admitted that it will have to raise prices, something which Netflix bulls have wanted to hear for months now.

BBI vs. NFLX 1-yr chart: