updated 2/10/2004 8:06:37 AM ET 2004-02-10T13:06:37

Viacom Inc. announced Tuesday that it plans to spin off its controlling stake in Blockbuster, the video rental chain, and take a $1.3 billion charge to write down the value of the business.

Blockbuster's business has been under pressure from cheap sales of DVDs through major retailers as well as emerging video technologies like video on demand and personal video recorders.

Viacom had long been considering a split-off of its roughly 81 percent stake in Blockbuster, and was believed to be looking for a buyer in recent weeks. The company didn't disclose details for the spin-off, and indicated that the plan was not yet final.

Viacom said it expected to separate Blockbuster in a tax-free split-off, which would most likely involve exchanging shares of Viacom for shares of Blockbuster. But the company said it would continue to consider other alternatives.

The company said the plan was subject to final approval from its board of directors as well as "an assessment of market conditions." Viacom expects to complete the spin-off by the middle of the year.

Viacom, which also owns CBS, MTV and the Paramount movie studio, made the announcement on the same day it reported fourth-quarter and full-year earnings for 2003.

The company said same-store revenues in its video business were down 7 percent in the fourth quarter due to overall softness in the movie rental industry.

Viacom took the $1.3 billion charge under an accounting rule that requires companies to occasionally assess the value of the goodwill of its businesses, or the amount above their current value that the company paid for them.

The announcement marked the second time that Viacom has said it would spin off Blockbuster. Viacom floated shares in Blockbuster in 1999 and said it would spin off the rest later, but the company later changed course, deciding to hold on to the business for the cash it generated.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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