The restructuring has already started to help Blockbuster, which posted a narrower-than-expected loss in the fourth quarter and recently said it expects to be profitable in 2008.

In addition to stiff competition from Netflix, Blockbuster has also had to contend with the increased consumer adoption of video-on-demand services and movie downloads.

Blockbuster bought Movielink.com last year and has said it plans to make movie downloading to televisions available.

Circuit City has been in a proxy fight with industry investor Mark Wattles, who has demanded that the company remove CEO Schoonover immediately and nominated five people for election to its board at this year's annual meeting.

Wattles has said that Circuit City not only needs new management but should also focus on overhauling its existing stores and consider selling itself.

Circuit City has seen its stock price crash to multiyear lows in the past year, and has posted losses in the past year. It has replaced more than 3,000 workers with lower-paid employees -- a move that disrupted its business and upset sales.

For the first quarter, Circuit City expects a loss from continuing operations before income taxes of $180 million to $195 million -- bigger than the one it posted in the comparable quarter a year ago.

The retailer has said it does not expect year-over-year performance to improve until the second half of the fiscal year.

Circuit City and Blockbuster were not available immediately for comment.

(Reporting by Aarthi Sivaraman and Sue Zeidler; Editing by Quentin Bryar and Quentin Webb)

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