"Everybody has speculated," says Thomas Johnson, senior vice president of corporate finance and business development. "It certainly makes a lot of sense if you were to put the two companies together. I think we would be very receptive to do something of that magnitude, and we're going to do whatever makes the most sense to create the most value for our shareholders."

Movie Gallery closed on its $1.2 billion acquisition of Hollywood early last year, adding 2,000 stores to its portfolio, which now operates 4,800 stores in total. Blockbuster, by contrast, has about 9,000 stores worldwide. Both companies are facing challenges as consumers switch their home entertainment preferences from store-based rentals toward Internet-subscription companies like Netflix and online downloads.

Meanwhile, Movie Gallery is still considering store closures. During its first quarter, which ended April 2, the company closed 46 stores that in duplicate locations as a result of the Hollywood acquisition. However, the company still plans to open 140 new stores this year.