A Blockbuster Deal

THE WORLD'S LARGEST VIDEO-RENTAL CHAIN HAS decided to market music as well as films. Blockbuster Entertainment Corp. has agreed to pay $185 million, including debt-assumption, for two record chains: Music Plus, based in Southern California, and Sound Warehouse, many of whose stores are in Texas. The combined 236 outlets immediately make Blockbuster the seventh largest U.S. record retailer, controlling about 4% of an $8 billion annual market. Despite soaring profits -- Blockbuster's third-quarter revenue jumped 24%, to $283.7 million -- the new acquisitions seem to reflect an industry assumption that the video-rental market is softening and that increasingly pervasive pay-per- view movies on cable will further slake the demand. But Blockbuster now faces some entrenched and ferociously competitive rivals in music retailing, like Musicland Stores Corp, not the mom-and-pop outlets it bulldozed while revolutionizing video rental in the 1980s.