Blockbuster Inc. on Wednesday reported a wider-than-expected loss in the first quarter as the No. 1 U.S. rental chain hikes spending to grab online rental subscribers from rival Netflix Inc. 
    Blockbuster and other in-store movie rental chains have been hurt by falling rental revenues over the past two years, leading Chairman and Chief Executive John Antioco to cut the company’s U.S. store base, divest  non-performing international assets and look to next-generation movie distribution systems for growth.
    Antioco announced recently that he is leaving Blockbuster after nearly a decade at its helm and says he plans to leave the company on track to dominate online rental before he goes.
    Here is an excerpt of Reuters post-earnings interview with Antioco:
    
    Q: Blockbuster and its store-based rival Movie Gallery Inc. have been closing stores for nearly two years now but in-store rental revenue fell 10 percent industrywide last quarter. When will the store base shrink enough to be the right size for demand?
    
    A: The problem is there are too many (stores). (The store base) has not compressed as much as overall revenue. We think the rate of store closings will have to increase and … I was kind of hoping that it would be in 2007 that capacity shrinkage would meet the overall revenue decline.
    Our number-one store competitor got a reprieve and was able to redo their bank deal and put off consolidation. I clearly see it at least in the first quarter of 2008.
    
    Q: It was surprising to see Blockbuster announce that it is opening a movie theater in Mexico after selling off of international and gaming businesses. Are there plans to expand into exhibition?
    
    A: It’s really a branding license and an operating agreement. Some investors in Mexico wanted to use Blockbuster branding in the theater. They thought it could create a branding difference and they wanted to rely on our retail operating expertise to operate the theater. Call it an experiment.
    
    Q: Last quarter you said that Total Access was costing Blockbuster about $2 per subscriber. Is that still the case?
    
    A: The way we get to that is you take the number of subscriber months, you then determine the total product costs of Total Access and add back the revenues that people are spending with us when they exchange movies and basically on average the debt cost is about $2 per subscriber.
    
    Q: You said that there were no plans to change prices on the program. What is the time frame on that?
    
    A: Specifically, we have no plans of changing the program. What we want to do is go into 2008 with as many subscribers as possible and continue through the course of 2007 to refine our model, sell subscribers more stuff and the focus is on that as opposed to raising prices immediately.
    The online rental market is projected to grow at 40 percent plus this year. It’s a land grab and we need to take advantage of…Total Access.
    
    Q: There were rumors that you were in talks to take over Movielink and you said today that you are still planning to have a movie downloading solution this year. What’s going on with that?
    
    A: That is a business we need to get into. We continue to look at and study what is the best way to enter that business — is it through acquisition, partnership or building a partnership for ourselves? The discussions around acquisition revolve around price and technology. Clearly we want to get into it before it starts ramping up at any kind of rate … I think by the end of this year we should enter the business.
    
    Q: Analyst have said that they aren’t concerned with Blockbuster’s spending on Total Access as long as the company turns a profit by the end of the year. What do you think about that? 
    
    A: I understand it and I think clearly we wouldn’t be growing this business if we didn’t think we could make a profit on it and I think (their) expectation are reasonable. The fourth quarter of the year is a huge growth quarter for the industry… by the time we hit that fourth quarter will obviously start to approach our goal for subscribers for the year and will start to take a look at that.
    
    Q: How is the movie title slate shaping up for the rest of the year?
    
    A: The second quarter is down, the third quarter is way up.
        
    Q: Have you thought about what you’re going to do after you leave Blockbuster at the end of the year?
 
    A: I don’t have any specific plans now. I’m just focusing on the business.