Blockbuster is losing big when it comes to at-home videos, so they are cutting back on expenses and on advertising in the U.S. to make up for it.

US same-store sales fell 15.9% in the 4Q and revenue dipped 18% to $1.08 billion compared to last year.

By closing its 500 weakest stores, the video-rental company hopes to reduce expenses by $200 million, the Financial Times reports.

Jim Keyes, chief executive officer, said the company was working with Rothschild, its financial advisors, on ways to increase its liquidity, including a possible recapitalisation.

Under Mr Keyes, Blockbuster is seeking to establish its brand in rapidly emerging new channels such as digital downloads and vending kiosks.

But they've already been beat to the punch. Netflix and Redbox dominate market share when it comes to digital downloads and vending kiosks, and Blockbuster will have a difficult time growing in those segments.

The company ended last year with $963 million of debt. Can they make it through 2010?