"One way or another we would like a decision made on the merits of the transaction as soon as possible," said John Antioco, Blockbuster Chairman and CEO, referring its proposed $1.3 billion, $14.50 a share, acquisition of Hollywood, and its 2,000 stores. Hollywood executives have already agreed to a $13.25 a share bid by competitor Movie Gallery. They have expressed apprehension about a possible Blockbuster takeover due to, among other things, doubts that the Federal Trade Commission would approve such a transaction because of anti-trust concerns. But Antioco revealed yesterday that Blockbuster executives are in talks with the FTC about the deal, and the company should get an opinion from the commission by the end of the month.

The elimination of late fees will cost Blockbuster $250 million to $300 million in operating losses, but executives said that could be partially offset by higher rental volumes. "We made a radical shift in the way we operate," Antioco said.

To compete with on-line movie-rental retailer Netflix, Blockbuster started offering rentals on the Internet last year and currently has 750,000 subscribers, with a goal of two million. Last year the company invested $140 million in capital expenditures and $120 million in operating costs on that initiative, as well as its in-store Movie Pass subscription service and the growth of its games business and sales of new and used movies and games.