Blockbuster, the world's largest home video rental chain, has announced a decisive move to replace video cassettes with DVDs throughout its global network of outlets.

Blockbuster chairman John Antioco said the company plans to discard 25% of its stock of video tapes to make room for the growing number of DVD releases.

The move to focus on the higher margin DVD rental business comes as the format is undergoing explosive growth in market penetration.

"We believe this is the opportune time to capitalize on the continuing explosive growth rate of DVD. The format has clearly gone mainstream," said Antioco. Consumers have demonstrated that they prefer to rent, rather than buy their movies, a trend we predict will continue."

The move will cost $450m to implement, but makes commercial sense for the retailer. Blockbuster makes more money on each DVD rental because the format is not yet part of a revenue-sharing agreement with the major movie studios. However, Antioco said recently that he expects DVD to eventually be a revenue sharing product for Blockbuster.

The change represents one of the most significant steps in the battle between DVD, introduced in the US in 1997, and video. Blockbuster plans to further promote the medium by giving over increased retail space to DVD player sales.

About 20 million US homes already have a DVD player, according to the DVD Entertainment Group, a consortium of player and disc suppliers. In the first half of this year shipments totalled 5.2m compared with 3m for the same period in 2000 - an increase of 70%.