Shares of Blockbuster Inc. sank nearly 30 percent Wednesday after the video rental chain warned that it may have to file for Chapter 11 bankruptcy protection.

Competition from DVD-by-mail company Netflix Inc. and DVD vending machines operated by Coinstar Inc. have eroded the Dallas-based company's revenue even as it staggers under a heavy debt load.

Its shares fell 12 cents Wednesday to close at 28 cents.

Blockbuster Inc. said in a regulatory filing late Tuesday that it was suffering "significant liquidity constraints" and could have to file for bankruptcy protection if it were unable to convince creditors to restructure a big chunk of its debt or its business continued to deteriorate.

The company has had to close about 1,300 stores and wants to shut down hundreds more. It had about 5,200 stores worldwide in January, excluding franchised shops. About 3,500 of those were in the United States, including dozens on Long Island.

Last month, Movie Gallery Inc., which also owns Hollywood Video and has several Long Island locations, filed for Chapter 11 bankruptcy protection. It is liquidating at least 760 stores.

"The increasingly competitive industry conditions under which we operate has negatively impacted our results of operations and cash flows and may continue to in the future. These factors raise substantial doubt about our ability to continue as a going concern," Blockbuster said in the regulatory filing.

The company predicts further declines in its sales. Still, it is trying to update its business, setting up video rental kiosks like those run by Coinstar and offering a DVD-mailing service.

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