Blockbuster Inc.’s third-quarter loss widened as the movie-rental company lost a half million online customers and absorbed costs for layoffs and store closings. Blockbuster reported a quarterly loss of $37.8 million. Massive layoffs and store closings are in the cards for Blockbuster.

Blockbuster is also trying to shift more of its business to selling movies, posters, candy and other items instead of relying so heavily on DVD rentals, which have been flat or declining. But the chain won’t try to undercut other retailers on prices.

I think if Blockbuster is to survive they must reinvent their image by delivering a fresh customer service experience. I would say a fair number of people still associate Blockbuster with excessive lay fees, out of stocks and complicated agreements that must be signed.

Until these areas are fixed it will be difficult to regain the king of block status back or make gains against Netflix and Wal-Mart online.