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Blockbuster's Hollywood Ending

Rick Aristotle Munarriz
March 29, 2005

In an ending that would do Blockbuster's (NYSE: BBI  ) old "Go Home Happy" ad campaign proud, the battle for Hollywood Entertainment (Nasdaq: HLYW  ) is over and everyone is better off as a result.

It may not seem that way at first. Once Blockbuster announced that it was pulling out of the bidding, its stock fell by 6% on fears that a pairing of the country's two largest video rental chains would upset the competitive nature of the Federal Trade Commission's antitrust guidelines. Hollywood Entertainment also saw its stock fall, as Blockbuster had made a higher bid than Movie Gallery's (Nasdaq: MOVI  ) $13.25 per-share offer.

While only Movie Gallery saw its stock climb -- 22% higher, actually -- I think all three companies will be better off in the end. Blockbuster has too many distractions lately as it tries to grow its online business to battle market leader Netflix (Nasdaq: