Blockbuster (BLOKA) 8-K Regulation FD Disclosure

Addressing Industry Challenges

and Achieving Financial Flexibility

Larry Zine, Chief Financial Officer

November 29, 2005

JPMorgan Consumer & Retail Holiday Conference

Exhibit 99.1

2

Cautionary Statements

These

slides

are

provided

as

part

of

Blockbuster's

presentation

and

should

be

viewed

in

the

context

of

the

presentation

and

Blockbuster's

most

recent

Form

10-K,

Form

10-Q

and

Form

8-Ks

filed

or

furnished

with

the

Securities

and

Exchange

Commission

("SEC"),

and

Blockbuster's

most

recent

quarterly

earnings

release

and 

other

press

releases,

all

of

which

can

be

found

on

the

Investor

Relations

section

of

www.blockbuster.com.

This

presentation

includes

"forward-looking

statements"

within

the

meaning

of

Section

27A

of

the

Securities

Act

of

1933

and

Section

21E

of

the

Securities

Exchange

Act

of

1934.

All

statements

that

do

not

relate

strictly

to

historical

or

current

facts

are

forward-looking,

including

those

describing

our

strategies

and

related

initiatives

and

investments,

objectives,

plans,

goals

and

business

outlook.

Specific

forward-looking

statements

include

those

relating

to

(1)

the

outlook

for

the

home

video

industry,

including

anticipated

consolidation,

and

our

efforts

to

increase

our

share

of

industry

revenues,

(2)

estimates

of

video

rental

transactions,

box

office

revenues

and

admissions,

the

impact

of

satellite,

VOD

and

other

distribution

channels

and

technologies,

and

other

industry-related

estimates

and

expectations,

(3)

home

video

release

schedules,

(4)

future

reductions

in

our

expenses,

cost

structure

and

capital

expenditures,

(5)

divestitures,

(6)

our

expectations

regarding

the

competitive

and

financial

impact

of

our

"No

Late

Fees"

program,

online

subscription

offering

and

other

initiatives,

(7)

goals

for

subscriber

growth

and

profitability

of

our

online

rental

activities,

(8)

our

expectations

with

respect

to

improved

operating

flexibility

as

a

result

of

the

third

amendment

to

our

credit

facilities,

and

(9)

other

statements

regarding

future

events,

conditions

or

outcomes.

These

forward-looking

statements

are

based

on

management's

current

intent,

belief,

expectations,

estimates

and

projections

regarding

our

company

and

our

industry.

They

are

not

guarantees

of

future

performance

and

involve

risks,

uncertainties,

assumptions

and

other

factors

that

are

difficult

to

predict.

Actual

results

may

vary

materially

from

those

expressed

in

or

indicated

by

these

statements

due

to

a

variety

of

factors,

including:

(1)

overall

industry

performance

and

the

accuracy

of

our

estimates

and

judgments

regarding

trends

impacting

the

video

rental

industry,

(2)

consumer

appeal

of

our

"No

Late

Fees"

program,

online

subscription

offering

and

other

product

and

service

offerings,

(3)

our

ability

to

respond

to

changing

consumer

preferences,

including

with

respect

to

new

technologies

and

alternative

methods

of

content

delivery,

and

to

effectively

adjust

our

offerings

as

necessary,

(4)

the

impact

of

in-store

and

online

competitor

pricing

and

product

and

service

offerings,

(5)

our

ability

to

obtain

favorable

terms

from

suppliers,

including

on

matters

such

as

copy

depth

and

uses

of

product,

(6)

the

studios'

dependence

on

revenues

generated

from

retail

home

video

and

their

related

determinations

with

respect

to

pricing

and

the

timing

of

distribution

of

their

product,

(7)

variability

in

consumer

appeal

of

movie

titles

and

games

software

released

for

rental

and

sale,

(8)

our

ability

to

comply

with

operating

and

financial

restrictions

and

covenants

in

our

debt

agreements

and

any

adverse

publicity

relating

thereto,

(9)

the

extent

and

timing

of

our

continued

investments

to

develop

and

implement

our

initiatives

and

our

ability

to

effectively

control

and

reduce

operating

expenses

and

capital

expenditures,

(10)

our

ability

to

effectively

and

timely

prioritize

and

implement

our

initiatives

and

our

related

ability

to

timely

implement

and

maintain

the

necessary

information

technology

systems

and

infrastructure

to

support

our

initiatives,

(11)

our

ability

to

capitalize

on

anticipated

industry

consolidation,

(12)

the

application

and

impact

of

future

accounting

policies

or

interpretations

of

existing

accounting

policies,

(13)

developments

affecting

our

outstanding

and

any

future

litigation

and

claims

against

us,

and

(14)

other

factors

described

in

our

filings

with

the

SEC,

including

those

discussed

under

the

heading

"Cautionary

Statements"

in

our

Form

10-K

for

the

fiscal

year

ended

December

31,

2004

and

under

"Disclosure

Regarding

Forward-Looking

Information"

in

our

reports

on

Form

10-Q

for

the

quarters

ended

March

31,

June

30

and

September

30,

2005.

The

forward-looking

statements

in

this

presentation

are

made

only

as

of

the

date

of

this

presentation

and

we

undertake

no

obligation

to

update

publicly

any

forward-looking

statement

for

any

reason,

even

if

new

information

becomes

available

or

other

events

occur

in

the

future.

3

Q3 2005 Same-Store Domestic Rental Revenues

Blockbuster same-store domestic rental revenues outperformed the

industry, even with the elimination of extended viewing fees which totaled

approximately 13% of rental revenues in Q3 2004

Hollywood Video

Movie Gallery

Blockbuster

1

Total Rental

-11.7%

-10.1%

-10.8%

-0.8%

Source:

Adams

Media

Research,

Published

Company

Reports

and

Rentrak

1

Company-operated stores, includes Online revenues

4

Home Video As A Whole Is Still Projected To Be A Growth Market...

$0

$10

$20

$30

2004

2005E

2006E

2007E

2008E

Total Retail

Total Rental

Source:

Kagan

Research, LLC

and Adams Media Research

Note:  Includes previously viewed/played product, which Blockbuster reports under rental revenue.

Domestic Home Video Market

$ Billions

Our efforts to revitalize our core rental business and our investment in the

online business better position

Blockbuster to capture market share

$24.5

$27.2

$29.6

$31.3

$32.3

5

…With Home Video Market Remaining A Compelling Channel For

Movie Studios...

Home Video

51.1%

All Other

26.7%

Theater

20.7%

VOD/PPV

1.7%

VOD/PPV

2.5%

Theater

20.10%

All Other

26.0%

Home Video

51.3%

2005E

2008E

Over the next three years, the home video market will continue to be the

largest revenue

driver for studio revenues

Source: Kagan Media Research, LLC

6

1998

1999

2000

2001

2002

2003

2004

2005E

2006E

2007E

2008E

...Growing Consumer Spending...

$202

$207

$211

$216

$214

$215

$233

$258

$266

$277

$279

Source: Kagan Media Research, LLC

Retail purchases and rental activity is projected to drive annual consumer

spending on home video to $279 per household in 2008

Consumer Household Spending On Home Video

Amount Per Household; Dollars

7

…And Rental Being The Most Popular Way To Watch A Movie

Video Rental

Video Retail

Theatrical Box Office

VOD/PPV

2.6

1.1

1.5

0.3

Domestic Filmed Entertainment Transactions

2004 and 2005; billions

Source: Kagan Media Research, LLC and Blockbuster Estimates

Video Rental

Video Retail

Theatrical Box Office

VOD/PPV

2.6

1.3

1.4

0.4

Total 2004 Transactions -

5.6 Billion

Total 2005E Transactions -

5.7 Billion

Rental transactions outpace retail transactions by more than double

8

2005 Has Been Challenging For Filmed Entertainment...

Domestic Home Video Box Office Results¹

2004 vs

2005

2004

Q2

2005

15.6%

35.9%

2004

2005

2004

2005

Q3

Q1

2004

2005

Q4E

19.6%

0.8%

Domestic Box Office Revenue²

Q3 2004 YTD vs

Q3 2005 YTD

Domestic Box Office Admissions³

Q3 2004 YTD vs

Q3 2005 YTD

2005

2004

2005

5.9%

2004

8.6%

1

Blockbuster Estimates

2

Kagan, Motion Picture Investor, 10/13/05

3 

Industry reflects total (in-store + online) NRR actuals as reported by RenTrak

minus Blockbuster estimates for the online segment

4

ICR Research, LLC

Domestic Growth In Other Forms of Entertainment

4

Q3 2004 YTD vs

Q3 2005 YTD Households; Millions

2004

Satellite

2005

2004

2005

2004

2005

Broadband

DVR

2004

2005

VOD

93.9%

7.8%

33.9%

29.3%

9

…With The Rental Industry Experiencing Significant Decline YTD

The Industry has declined more than analysts anticipated.

-3.7%

-10.4%

2005 Analysts consensus ¹

Q3 YTD Industry Actuals ²

Domestic In-Store Rental Industry

1 

Sources:  Average of analysts (Kagan

Research LLC, Adams Media, LEK Consulting -

Feb-05)

2  

Industry reflects total (in- store + online) NRR actuals as reported by RenTrak minus Blockbuster estimates for the online segment

10

Q4 Release Schedule Is Slightly More Favorable

Domestic Box Office Results

2004 vs

2005; $ millions

Slightly more favorable release schedule with greater rental appeal

Key titles coming to home video in November

2004

Nov

2005E

8.2%

8.2%

23.9%

$728 M

$668 M

$916 M

$1,135 M

$1,643 M

$1,509 M

2004

2005E

2004

2005

2004

2005

2004

2005

Dec

Oct

Sept

Aug

$863 M

$599 M

$305 M

$385 M

20.8%

30.6%

Rental is a momentum business

Source:  Blockbuster Estimates

Financial And Strategic Review

12

Rental

Retail

Revenue

Q1-Q3 2005; $ millions

$1,549

$1,386

$1,399

Q2

Q3

Q1

Rental

Retail

Gross Margin

Q1-Q3 2005; $ millions

Reported Third Quarter Results-Revenue and Gross Margin...

$864

$771

$791

Same-store

sales

(0.4%)

(4.7%)

(3.8%)

Q2

Q3

Q1

55.8%

55.1%

57.0%

% Margin

Rental

Retail

$1,410

$1,386

Revenue

Q3 04 vs

Q3 05; $ millions

Q3 04

Q3 05

Same-store

sales

(3.0%)

(3.8%)

Rental

Retail

$862

$791

Q3 04

Q3 05

61.1%

57.0%

% Margin

Gross Margin

Q3 04 vs

Q3 05; $ millions

13

1

Excludes

non-cash

charges,

non-recurring

items

and

share

based

compensation.

See

reconciliations

for

this

non-GAAP

financial

measure

in

the

Appendix.

OIBDA¹

Q1-Q3 2005; $ millions

$10

$63

$38

Q2

Q3

Q1

...SG&A and OIBDA...

SG&A

Q1-Q3 2005; $ millions

$878

$761

$735

Q2

Q3

Q1

SG&A

Q3 04 vs

Q3 05; $ millions

Q3 04

Q3 05

$735

$779

Q3 04

Q3 05

$63

$83

OIBDA¹

Q3 04 vs

Q3 05; $ millions

14

…

And Adjusted Operating Income and Free Cash Flow

Free Cash Flow²

Q1-Q3 2005; $ millions

($148)

$19

Q2

Q3

Q1

Adjusted Operating Income ¹

Q3 04 vs. Q3 05; $ millions

Q3  04

Q3 05

$5

$19

1

Excludes

non-cash

charges,

non-recurring

items

and

share

based

compensation.

See

reconciliations

for

this

non-GAAP

financial

measure

in

the

Appendix.

2

Free Cash Flow = Net cash flow provided by operating activities

-

CAPEX -

rental library purchases.  See reconciliations for this non- GAAP financial

measure in the Appendix.

Q2

Q3

Q1

Adjusted Operating Income ¹

Q1-Q3 2005; $ millions

$5

($119)

($31)

($47)

15

Goals For Achieving Financial Flexibility

Modified

Capital Structure

Review Asset

Portfolio

Divest Non-Core Assets

DEJ

Evaluate Underperforming   

and Non-core Assets

International Assets

•

Xtra-vision -200 stores¹

•

Gamesation -

200 stores¹

•

Other Markets

MTC

-

40 stores¹

MBI

-

70 stores¹

Rhino -

90 stores¹

GameRush -

450 concepts¹

Covenant Relief

Amended credit

agreement

Raised Equity Capital

$150M in gross proceeds

from convertible preferred

stock offering

Proceeds Uses

Debt reduction

General corporate

purposes

Lower Overall

Cost

Reduce G&A and

Marketing

Over $100M expected

in 2006 and $50M

expected in 2007

Operating savings

from non-core

divestitures

Lower overhead

above the store level

Lower Capital Spend

Lower capital

expenditures to

approximately $90M in

2006

1

Store counts are approximated

16

Online

Profitable in 2007

5

Improve Key Metrics

3

2

Customer Excellence

Subscriber Growth

1

Industry Consolidation

5

No Late Fees (traffic/

transactions /active members)

1

Market Leadership

4

Operational Excellence

3

In-store

Financial Performance

Opportunity

Operating Income

EPS

Cash Flow

Goals For Building Future On Our Current Strategy

Corporate

Lean Corporate

Structure

1

2

Positive Comps

Profitability Improvement

in 2006

4

Clear Focus on Core

In-store and Online

Businesses

2

Appendix

Reconciliations of Non-GAAP Financial Measures

Adjusted Operating Income (Loss) and OIBDA Reconciliations

($ in millions)

Q1 2005

Q2 2005

Q3 2005

Q3 2004

Restated

Reconciliation of adjusted operating income (loss) and OIBDA:

Operating loss

(72.1)

$                   

(58.5)

$              

(350.4)

$            

(1,485.3)

$         

Costs incurred for the potential acquisition of Hollywood Entertainment Corporation

12.6

-

-

-

Severance costs incurred for reduction-in-force

2.0

7.2

-

-

Non-cash share-based compensation expense

10.1

11.4

7.7

-

Impairment of goodwill and other long-lived assets

-

9.2

347.6

1,504.4

Adjusted operating income (loss)

(47.4)

$                   

(30.7)

$              

4.9

$                  

19.1

$               

    Depreciation and intangible amortization

57.5

68.2

58.3

64.1

OIBDA

10.1

$                    

37.5

$               

63.2

$               

83.2

$               

We

report

adjusted

operating

income

(loss)

excluding

certain

non-cash

items,

including

share-based

compensation

pursuant

to

SFAS

No.

123

(revised),

Share-Based

Compensation,

valuation

allowances

recorded

against

our

deferred

tax

assets

pursuant

to

SFAS

109,

Accounting

for

Income

Taxes,

and

impairments

of

goodwill

and

other

long-lived

assets

pursuant

to

SFAS

No.

142,

Goodwill

and

Other

Intangible

Assets,

and

SFAS

No.

144,

Accounting

for

the

Impairment

or

Disposal

of

Long-Lived

Assets.

Management

believes

that

because

the

total

amount

of

the

non-cash

charges

relates

primarily

to

(i)

the

impairment

of

goodwill

associated

with

Viacom's

acquisition

of

Blockbuster,

(ii)

impairment

of

long-lived

assets

which

are

non-recurring

in

nature,

(iii)

share-based

compensation

expense

primarily

resulting

from

the

adoption

of

SFAS

123R

in

the

fourth

quarter

of

2004

and

(iv)

the

valuation

allowance

recorded

against

our

deferred

tax

assets

which

is

non-recurring

in

nature,

adjusting

our

financial

results

to

exclude

these

amounts

provides

investors

with

a

clearer

perspective

on

our

current

underlying

operating

performance.

Additionally,

we

report

adjusted

operating

loss

excluding

costs

incurred

related

to

the

potential

acquisition

of

Hollywood

Entertainment

Corporation

and

severance

costs

incurred

for

a

reduction-

in-force.

Management

believes

that

because

these

items

are

non-recurring

in

nature,

adjusting

our

financial

results

to

exclude

these

amounts

provides

investors

with

a

clearer

perspective

on

our

current

underlying

operating

performance.

Management

uses

operating

loss

and

net

loss

excluding

these

non-cash

and

non-recurring

items

as

an

internal

measure

of

business

operating

performance.

We

define

"Operating

Income

before

Depreciation

and

Amortization"

("OIBDA")

as

adjusted

operating

income

(loss)

adjusted

to

also

exclude

the

Depreciation

and

Intangible

Amortization

as

presented

in

our

Consolidated

Statement

of

Operations.

We

use

OIBDA,

among

other

things,

to

evaluate

our

operating

performance

and

as

one

of

several

components

of

incentive

compensation

targets

for

certain

management

personnel,

and

this

measure

is

among

the

primary

measures

used

by

management

for

planning

and

forecasting

of

future

periods.

This

measure

is

an

important

indicator

of

our

operational

strength

and

performance

of

our

business

because

it

provides

a

link

between

profitability

and

operating

cash

flow.

We

believe

the

presentation

of

this

measure

is

relevant

and

useful

for

investors

because

it

allows

investors

to

view

performance

in

a

manner

similar

to

the

method

used

by

our

management,

helps

improve

their

ability

to

understand

our

operating

performance

and

makes

it

easier

to

compare

our

results

with

other

companies

that

have

different

financing

and

capital

structures

or

tax

rates.

In

addition,

this

measure

is

also

among

the

primary

measures

used

externally

by

our

investors,

analysts

and

peers

in

our

industry

for

purposes

of

valuation

and

comparing

our

operating

performance

to

other

companies

in

our

industry.

As

OIBDA

is

not

a

measure

of

performance

calculated

in

accordance

with

generally

accepted

accounting

principles

("GAAP"),

OIBDA

should

not

be

considered

in

isolation

of,

or

as

a

substitute

for,

net

income

(loss)

as

an

indicator

of

operating

performance.

OIBDA,

as

we

calculate

it,

may

not

be

comparable

to

similarly

titled

measures

employed

by

other

companies.

In

addition,

this

measure

does

not

necessarily

represent

funds

available

for

discretionary

use,

and

is

not

necessarily

a

measure

of

our

ability

to

fund

our

cash

needs.

As

OIBDA

excludes

certain

financial

information

compared

with

operating

income

(loss),

the

most

directly

comparable

GAAP

financial

measure,

users

of

this

financial

information

should

consider

the

types

of

events

and

transactions

which

are

excluded.

Free Cash Flow Reconciliation

Free

cash

flow

reflects

our

net

cash

flow

from

operating

activities

less

rental

library

purchases

and

capital

expenditures.

We

use

free

cash

flow,

among

other

things,

to

evaluate

our

operating

performance.

Management

believes

free

cash

flow

provides

investors

with

an

important

perspective

on

the

cash

available

for

debt

service,

acquisitions

and

shareholders

after

making

the

capital

investments

required

to

support

ongoing

business

operations

and

long-term

value

creation. 

We

believe

the

presentation

of

free

cash

flow

is

relevant

and

useful

for

investors

because

it

allows

investors

to

view

performance

in

a

manner

similar

to

the

method

used

by

management

and

helps

improve

their

ability

to

understand

our

operating

performance.

In

addition,

free

cash

flow

is

also

a

measure

used

by

our

investors

and

analysts

for

purposes

of

valuation

and

comparing

our

operating

performance

to

other

companies

in

our

industry.

As

free

cash

flow

is

not

a

measure

of

performance

calculated

in

accordance

with

GAAP,

free

cash

flow

should

not

be

considered

in

isolation

of,

or

as

a

substitute

for,

net

income

(loss)

as

an

indicator

of

operating

performance

or

net

cash

flow

provided

by

operating

activities

as

a

measure

of

liquidity.

Free

cash

flow,

as

we

calculate

it,

may

not

be

comparable

to

similarly

titled

measures

employed

by

other

companies.

In

addition,

free

cash

flow

does

not

necessarily

represent

funds

available

for

discretionary

use

and

is

not

necessarily

a

measure

of

our

ability

to

fund

our

cash

needs.

As

we

use

free

cash

flow

as

a

measure

of

performance

and

as

a

measure

of

liquidity,

the

tables

below

reconcile

free

cash

flow

to

both

net

loss

and

net

cash

flow

provided

by

operating

activities,

the

most

directly

comparable

amounts

reported

under

GAAP.

($ in millions)

Net loss

(57.5)

$                

(57.2)

$           

(491.4)

$         

Adjustments to reconcile net loss to free cash flow:

Depreciation and amortization of intangibles

57.5

68.2

58.3

Impairment of goodwill and other long-lived assets

-

-

347.6

Non-cash share-based compensation expense

10.1

11.3

7.7

Capital expenditures

(38.4)

(41.1)

(22.3)

Rental library purchases, net of rental amortization

4.3

(16.4)

41.9

Changes in working capital

(75.6)

(53.6)

(49.9)

Changes in deferred taxes and other

(48.5)

(29.9)

127.0

Free cash flow

(148.1)

$             

(118.7)

$         

18.9

$            

Q1 2005

Q2 2005

Q3 2005

Net cash flow provided by operating activities

110.9

$               

164.7

$          

216.8

$          

Adjustments to reconcile net cash flow provided by operating activities to free cash flow:

Rental library purchases

(220.6)

(242.3)

(175.6)

Capital expenditures

(38.4)

(41.1)

(22.3)

Free cash flow

(148.1)

$             

(118.7)

$         

18.9

$