Early Thursday morning, Blockbuster (BLOKA) announced that it filed for voluntary Chapter 11 bankruptcy petitions. The move comes after an agreement with bondholders to recapitalize the movie and game rental chain.

According to the company, the filing in the U.S. Bankruptcy Court of the Southern District of New York applies to the company and its domestic subsidiaries, but not to the non-U.S. operations or the group's franchisees. Reportedly, the group has agreed on a deal with bondholders to swap secured notes for equity in a reorganized Blockbuster.

This morning, Barclay's downgraded Netflix (NFLX) to "equal weight" from "overweight." Although the brokerage cut the stock, it decided to issue a price target increase to the movie rental company, upping said price to $88 from $72.

Barclay's based the downgrade on valuation, but noted that the company will continue to benefit from its subscription-based model and its delivery service. NFLX offers two options for movie delivery, either receive a DVD in the mail or watch the movie directly over an Internet connection. With the many options in entertainment systems, the ability to watch a movie over an Internet connection (be it on a computer or a television connected to an Internet-ready device) is a major boon for NFLX. The downgrade stems from Barclay's belief that "the risk-reward in Netflix shares is now more balanced."

TheStreet.com ran an article stating that Blockbuster (BBI) may be forced into bankruptcy if its cash flow doesn't improve and it can't restructure debt. According to the article, BBI's debt has been as high as $1 billion. In a filing with the SEC, BBI stated: "These factors raise substantial doubt about our ability to continue as a going concern."

The company currently faces $855.9 million in debt and is in talks with Hollywood studios in hopes of reducing BBI's DVD costs. The company also stated that increased competition from the likes of Netflix (NFLX) and Redbox has severely hurt its market share.

Here is a quick review of Blockbuster Inc's (NYSE: BBI) press release from this morning, while I wait for the conference call to begin.

Blockbuster reported a loss of 26 cents a share, much worse then a consensus estimate loss of 15 cents a share. Revenue, however, outperformed the consensus, $1.47B to $1.36B. The company also announced this morning that it sold its U.K. specialty games retailer Games Station Limited to The Game Group for about $150 million in cash, with the majority of the proceeds going to pay down outstanding debt.

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9:50am: Logging into the conference call now, although these never start on time, let alone early. Here comes fifteen minutes of listening to elevator music...

10:00: As a point of interest, I just looked at Blockbuster's stock, and it is trading down 40 cents to $5.81. Still waiting for the call to begin.

10:05: An operator just chimed in to let us know that the call would begin shortly, and then put us back on hold. Tease.

10:08: And here we go. The director of investor relations, Ms. Torres, is reading the standard legal mumbo-jumbo.

10:09: Larry Zine, CFO, gets handed off the call. He said increasing the subscriber growth is the key to the company's economic model. He is now going over the results -- $1.47B in revenue, rental revenues of $1.05B. Blockbuster Total Access offset slowing in-store rentals. The company met its aggressive online growth objective -- adding 800,000 online subs.

10:13: Zine continued, saying the rental industry remained under pressure, putting pressure on rental gross margin. Operating loss was 26 cents per share. The company announced the sale of Game Station, with a large amount of proceeds (about $150 million) going to pay off debt and strengthen the balance sheet. Reduced debt by $500 million since November 2005.

10:16: Zine summarized, saying they are taking the right steps to strengthen the company.

10:17: CEO John Antiocco got the mic. He said the company had 60% of the subscriber growth in the online space. Grew subscriber base by 35%. Nearly doubled online base in five months to 3 million. The company seems real focused on Total Access and the online market.

After blogging about the launch of Blockbuster Inc.'s (NYSE: BBI) Total Access program in November, I was contacted and asked if I would like to try the program in exchange for writing a review about it. I was given a free one-year subscription of the service in exchange for promising to review the service honestly. Now that I have given full disclosure, here are a number of my thoughts on the Blockbuster Total Access program:

• The program is an obvious improvement. The online service operates exactly the same way as it previously did, but now a rental can be returned directly to the store for a new movie. I found this came in convenient more than once - when I was in the mood to watch a specific movie that was not in my queue or when I had not realized a movie I wanted to see had just come out on DVD. Since the service costs the same as Netflix, Inc (NASDAQ: NFLX), the added functionality is essentially a free upgrade.
• I found the online movie store well stocked and the movies arrived quickly. My queue, which has around 30 movies in it, says that all of them are available immediately, and I have never had to wait more than two days to receive the next movie in my queue.
• The only drawback I noticed was from the information I was given when starting the program - the movie database at Blockbuster is slightly smaller than at Netflix (60,000+ to 65,000+). That being said, I did not have any trouble finding any movies, even older movies (Dirty Harry), foreign movies (Ran), animated movies (Appleseed) or indie movies (Paradise Now).