Blockbuster earlier this week announced that it would begin offering videogames as part of its DVD by mail subscription model, and there may be more at stake here than simply trying to gain some ground on Netflix.

According to news and rumor site Fudzilla, Blockbuster's financial situation is in shambles. It all started with the company being delisted by the New York Stock Exchange in early July, and since then, Blockbuster was able to get a forbearance agreement to delay a reported $42 million in interest payments, Fudzilla reports.

After all that, it seems Blockbuster will need even more extensions if it's to avoid filing for bankruptcy, though Creditors are reportedly pushing pretty hard for the rental chain to go through with a Chapter 7 filing.

The cold reality is that Blockbuster might simply be running out of both time and options. To date, the company has made a number of moves to try and adapt and remain competitive, including cheap kiosk rentals, introducing videogames to its DVD by mail business, and signing an agreement with Warner Brothers to receive movies a full four weeks before Netflix.

As Netflix continues to steamroll the competition and plow into everyone's living room, Blockbuster could use a victory. Well, the struggling movie rental firm got one, and we're not talking about the moral variety, either. In a deal that has eluded both Netflix and Redbox, Warner Bros. has agreed to make new titles available immediately in Blockbuster's stores, mail, and on-demand.

"Warner Bros. and Blockbuster have enjoyed a cooperative and successful relationship for more than 25 years," Warner Home Video president Ron Sanders said in a statement. "The updated agreement will continue to provide Blockbuster customers with access to Warner Bros. titles the same day they are released."

That can't sit well with Netflix, who isn't allowed to ship new Warner Bros. flicks until 28 days after release. But it's great for Blockbuster, who last week warned for the second time in a year that filing for Chapter 11 bankruptcy protection is a possibility.

The new deal gives Blockbuster a four week advantage over Netflix, starting with The Blindside, which was released earlier this week.

According to a filing with the Securities and Exchange Commission, Blockbuster plans to board up anywhere from 810 to 960 of its retail locations by the end of 2010. Blockbuster says the closures affect all unprofitable stores as it aims "to improve four-wall profitability."

Most of the closures will take place this year, with between 580 and 685 stores expected to be on the chopping block. The remaining unprofitable stores will shut down sometime next year, but there's still time to turn things around.

"All these stores are candidate stores," Blockbuster spokesperson Randy Hargove said in a phone conversation with Cnet. "Although we may in fact close that many stores, if we can renegotiate leases or remodel stores to make them more profitable, that number might go down."

Meanwhile, the company's kiosk business continues to grow and is set to explode this year. In a separate filing with the SEC, Blockbuster said it plans to have 2,500 units available by the end of 2009, up significantly from the 497 kiosk units now available. And by the end of the 2010, Blockbuster anticipates 10,000 kiosks scattered throughout the country in an attempt to "increase the points of distribution."

And maybe increase its stock price. Blockbuster shares are currently trading for $1.40, a far cry from the $45 Netflix shares change hands at.