A test of new store formats and sizes is under consideration along with partnerships with studios. In short, he is calling for a redefinition of Blockbuster stores.

Total revenues for second quarter fell to $1.26 billion, down 2.8% from $1.3 billion in the second quarter of 2006. The net loss of $35.3 million came despite a gain of $77.7 million related to its sale of 217 of its UK-based GameStation stores. Yet, at the same time, the reduced overall store count contributed to the quarterly revenue loss, which was also impacted, management said, by "an unfavorable home video release schedule."

Meanwhile, the subscriber base of the company's Blockbuster Total Access program, designed to let online renters return DVDs to stores as well as by mail, grew by 600,000, Keyes said. The additions came at a cost, but took the total number of subscribers to 3.6 million.

In response to an analyst's question, he estimated that online consumers who return DVDs at stores account for about 20% of the online base. While acknowledging the lack of profit in providing free video exchanges, he also noted that these customers are the heaviest DVD users, a market that is important to the company.

"While we remain committed to capturing market share in the overall video rental market, we are absolutely focused on striking the appropriate balance between growth and enhanced profitability," Keyes said. "Our goal is to transform Blockbuster into a company that quickly responds to customer's changing needs for convenient access to media entertainment."