Re: Blockbuster Inc. Stockholder Proposals Submitted by the Comptroller of the City of New York, William C. Thompson Jr., each dated December 13, 2006

I. The Proposals.

II. The Company May Exclude the Proposals Under Proxy Rule 14a-8(f) Because They Do Not Comply With Proxy

Rules 14a-8(c) and 14a-8(d).

III. The Company May Exclude the Compensation Resolution Proposal Pursuant to Rule 14a-8(i)(7) Because the

Compensation Resolution Proposal Concerns the Ordinary Business Operations of the Company.

IV. Alternatively, Certain Statements in the Proposals May Be Omitted Under Proxy Rule 14a-8(i)(3) Because They Are Materially False and Misleading.

A. The Compensation Resolution Proposal

B. Declassified Board Proposal

V. Conclusion.

[INQUIRY LETTER]

[APPENDIX 1]

RESOLVED, that shareholders of Blockbuster Inc. ("Blockbuster") urge the board of directors to adopt a policy that Blockbuster shareholders be given the opportunity at each annual meeting of shareholders to vote on an advisory resolution, to be proposed by Blockbuster's management, to ratify the compensation of the named executive officers ("NEOs") set forth in the proxy statement's Summary Compensation Table (the "SCT") and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.

Investors are increasingly concerned about mushrooming executive compensation which sometimes appears to be insufficiently aligned with the creation of shareholder value. Additionally, recent media attention to questionable dating of stock options grants by companies has raised related investor concerns.

The SEC has created a new rule, with record support from investors, requiring companies to disclose additional information about compensation and perquisites for top executives. The rule goes into effect this year. In establishing the rule the SEC has made it clear that it is the role of market forces, not the SEC, to provide checks and balances on compensation practices.

We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not provide shareholders with enough mechanisms for providing input to boards on senior executive compensation. In contrast to U.S. practices, in the United Kingdom, public companies allow shareholders to cast an advisory vote on the "directors' remuneration report," which discloses executive compensation. Such a vote isn't binding, but gives shareholders a clear voice that could help shape senior executive compensation.

Currently U.S. stock exchange listing standards require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages. (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49 (2004))

Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.

Accordingly, we urge Blockbuster's board to allow shareholders to express their opinion about senior executive compensation at Blockbuster by establishing an annual referendum process. The results of such a vote would, we think, provide Blockbuster with useful information about whether shareholders view the company's senior executive compensation, as reported each year, to be in shareholders' best interests.

We urge shareholders to vote for this proposal.

December 13, 2006

Mr. Bryan J. Pechersky

Vice President and Secretary
Blockbuster, Inc.
1201 Elm Street
Dallas, TX 75270

Dear Mr. Pechersky:

I write to you on behalf of the Comptroller of the City of New York, William C. Thompson, Jr. The Comptroller is the custodian and a trustee of the New York City Teachers' Retirement System, the New York City Police Pension Fund, and the New York City Fire Department Pension Fund, and custodian of the New York City Board of Education Retirement System (the "Systems"). The Systems' boards of trustees have authorized the Comptroller to inform you of their intention to present the enclosed proposal for the consideration and vote of stockholders at the company's next annual meeting.

The Systems' boards of trustees have passed resolutions calling on companies to declassify their boards of directors. We believe that the ability to elect directors is the single most important use of the shareholder franchise. Accordingly, directors should be accountable to shareholders on an annual basis. The election of directors by classes, for three-year terms, in our opinion, minimizes accountability and precludes the full exercise of the rights of shareholders to approve or disapprove annually the performance of a director or directors.

I, therefore, offer the enclosed proposal for the consideration and vote of shareholders at the company's next annual meeting. It is submitted to you in accordance with Rule 14a-8 of the Securities Exchange Act of 1934, and I ask that it be included in the company's proxy statement.

Letters from The Bank of New York certifying the Systems' ownership, for over a year, of shares of Blockbuster, Inc. common stock are enclosed. Each System intends to continue to hold at least $2,000 worth of these securities through the date of the company's next annual meeting.

We would be happy to discuss the proposal with you. Should the board of directors decide to endorse its provision as corporate policy, we will withdraw the proposal from consideration at the annual meeting. If you have any questions on this matter, please feel free to contact me at (212) 669-2013.

Very truly yours,

/s/

Kenneth B. Sylvester

Enolosures

Blockbuster Classified Board 2007

BE IT RESOLVED, that the stockholders of Blockbuster, Inc. request that the Board of Directors take the necessary steps to declassify the Board of Directors and establish annual elections of directors, whereby directors would be elected annually and not by classes. This policy would take effect immediately, and be applicable to the reelection of any incumbent director whose term, under the current classified system, subsequently expires.

We believe that the ability to elect directors is the single most important use of the shareholder franchise. Accordingly, directors should be accountable to shareholders on an annual basis. The election of directors by classes, for three-year terms, in our opinion, minimizes accountability and precludes the full exercise of the rights of shareholders to approve or disapprove annually the performance of a director or directors.

In addition, since only one-third of the Board of Directors is elected annually, we believe that classified boards could frustrate, to the detriment of long-term shareholder interest, the efforts of a bidder to acquire control or a challenger to engage successfully in a proxy contest.

We urge your support for the proposal to repeal the classified board and establish that all directors be elected annually.

KS:ma

January 19, 2007

Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F. Street, NE
Washington, DC 20549

Ladies and Gentlemen:

This letter supplements the no-action request letter we submitted on behalf of our client, Blockbuster Inc. (the "Company"), on January 12, 2007 (the "No-Action Letter"), requesting that the Staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Staff") concur with the Company's view that each of the stockholder proposals submitted by the Comptroller of the City of New York, William C. Thompson Jr. (the "Proponent") on December 13, 2006 (i) regarding the executive officer compensation advisory resolution (including the supporting statement contained therein, the "Compensation Resolution Proposal") and (ii) regarding the declassification of the board of directors of the Company (including the supporting statement contained therein, the "Declassified Board Proposal" and, together with the Compensation Resolution Proposal, the "Proposals") may properly be omitted from the proxy materials (the "Proxy Materials") to be distributed by the Company in connection with its 2007 annual meeting of stockholders. For ease of reference, a copy of the No-Action Letter, together with its corresponding exhibits, is attached hereto as Attachment I.

Reference was made in the No-Action Letter to a letter dated December 26, 2006 from the Company to the Proponent (the "Defect Notice"), sent by the Company pursuant to Rule 14a-8(f) of Regulation 14A promulgated under the Securities and Exchange Act of 1934 (each rule promulgated thereunder, a "Proxy Rule") informing the Proponent of the Company's belief that the Proposals failed to follow the procedural requirements set forth in Proxy Rules 14a-8(c) and 14a-8(d).

Based on standard procedure for overnight delivery via Federal Express (and verification by Federal Express' tracking system), the Company believes that the Proponent received the Defect Notice on December 27, 2007. Pursuant to Proxy Rule 14a-8(f), the Proponent had fourteen (14) days from the date the Proponent received the Defect Notice to provide a response. As of the date of this letter, which is twenty-three (23) days after the Company believes the Proponent received the Defect Notice, the Company has not received a response to the Defect Notice from the Proponent. The Company believes that the Proponent's failure to respond to the Defect Notice is a concession by the Proponent that the Proposals, in fact, are procedurally deficient under the Proxy Rules. Therefore, the Company requests respectfully that the Staff consider the Proponent's failure to respond to the Defect Notice and concur with the Company's arguments set forth in Section II of the No-Action Letter that the Proposals may be excluded from the Proxy Materials.

Should the Staff disagree with our conclusions regarding the exclusion of the Proposals, or should the Staff desire any additional information in support of our position, we would appreciate the opportunity to confer with the Staff concerning these matters prior to the Staff's issuance of its response. Please do not hesitate to contact the undersigned at (214) 220-7860 or Bryan Pechersky, Senior Vice President, Senior Corporate Counsel and Secretary of the Company at (214) 854-3151. The Company requests respectfully that, in the interest of time, the Staff send a copy of its response to this letter (if applicable) and to the No-Action Letter via fax to the undersigned at (214) 999-7860, to the Company at (214) 854-3271, and to the Proponent at (212) 669-4072 contemporaneously with sending its response(s) via mail.

Very truly yours,

/s/

Robert L. Kimball

cc: Bryan J. Pechersky, Esq. [Company]
Kenneth B. Sylvester [Proponent]

February 12, 2007

Securities and Exchange Commission
Division of Corporation Finance
Office of the Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549

To Whom It May Concern:

I write on behalf of the five separate New York City Retirement Systems (the "Systems"), in response to the January 12 and 19, 2007 letters sent to the Division of Corporation Finance (the "Division") by Robert L. Kimball of the firm of Vinson & Elkins, counsel for Blockbuster Inc. ("Blockbuster" or the "Company"). In those letters, the Company contends that two shareholder proposals, one filed jointly by the Teachers' Retirement System of the City of New York ("NYC TRS"), the New York City Police Pension Fund (the "Police Fund"), the New York City Fire Department Pension Fund (the "Fire Fund"), and the New York City Board of Education Retirement System ("BERS"), and one filed separately by the New York City Employees Retirement System ("NYCERS"), may be omitted from the Company's 2007 proxy statement and form of proxy pursuant to Rules 14a-8(c) and (d), 14a-8(i)(7), and 14a-8(i)(3) under the Securities Exchange Act of 1934.

As shown below, however: each of the five Retirement Systems is separate and independent, and none is under the control of, nor the "alter ego" of, the New York City Comptroller; it is well-settled that executive compensation is not "ordinary business"; and no statements in the Proposal are false or misleading. In light of that, and based upon my review of the Proposals, the Company's letters, and Rule 14a-8, it is my opinion that the Proposals may not be omitted from the Company's 2007 Proxy Materials. Accordingly, each of the Systems respectfully requests that the Staff of the Division deny the relief that the Company seeks.

The Proposal submitted on behalf of NYCERS seeks an advisory vote of Blockbuster shareholders to approve compensation of the Company's named executive officers, as stated in the Resolved clause:

RESOLVED, that shareholders of Blockbuster, Inc. ("Blockbuster") urge the Board of Directors to adopt a policy that Blockbuster shareholders be given the opportunity at each annual meeting of shareholders to vote on an advisory resolution, to be proposed by Blockbuster's management, to ratify the compensation of the named executive officers ("NEOs") set forth in the proxy statement's Summary Compensation Table (the "SCT") and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.

The wholly separate Proposal submitted on behalf of NYC TRS, the Police Fund, the Fire Fund and BERS requests that "the Board of Directors take the necessary steps to declassify the Board of Directors and establish annual elections of directors ..."

In its letters of January 12 and 19, 2007, Blockbuster requested that the Staff of the Division not recommend enforcement action to the Commission if the Company omits both Proposals pursuant to the following Rules:

As to both Proposals, Rule 14a-8(c) ("each shareholder may submit no more than one proposal to a company for a particular shareholders' meeting") and 14a-8(d) (500-word limit);

As to the NYCERS Proposal, Rule 14a-8(i)(7) (proposal relates to ordinary business of the company); and

As to both Proposal, Rule 14a-8(i)(3) (proposal contains false or misleading material).

Pursuant to Rule 14a-8(g), the Company bears the burden of proving that one or more of these exclusions applies. As detailed below, the Company has failed to meet that burden, and its request for no-action relief should accordingly be denied.

Blockbuster alleges incorrectly that all of the Systems are under the control of the New York City Comptroller, and so should be regarded under Rule 14a-8(c) as a single proponent that has impermissibly filed two proposals. As shown below, the five Retirement Systems are separate and distinct entities with independent Boards of Trustees. None is under the control of the Comptroller, who serves only as investment advisor and custodian of assets for the Systems. On four of the Systems' Boards, the Comptroller is just one Trustee out of many - all of the rest of whom are independent of the Comptroller. On the fifth Board, that of BERS, the Comptroller is not even a Trustee. The Systems plainly do not meet the test cited by SEC Staff in Trans World Corporation (Feb. 5, 1981) for excluding those proposals under Rule 14a-8(c): that one proponent "is the alter ego of any of the proponents" or "possesses control over the shares owned...by any another proponent."

As detailed below, each of the five Systems is a substantial independent entity, with its own offices and staff, and billions of dollars in assets and tens (or hundreds) of thousands of members, and overall control of its own investments. In aggregate, the New York City Systems hold close to one hundred billion dollars in assets. Under the governing rules and statutes, each System is run by its own independent Board of Trustees, on which the Comptroller never has more than one-seventh of the votes.

NYCERS is a public employee retirement system for employees of New York City (and certain other government units) not covered by one of the four other New York City pension systems. The NYCERS Board of Trustees ("NYCERS Board") consists of eleven members: the Comptroller; the Public Advocate; a representative appointed by the Mayor; each of the five borough presidents; and three public employee representatives (New York City Administrative Code §13-103(b)).

Beyond appointing the Comptroller's own representative, the Comptroller does not appoint, or approve the appointment of, any of the other NYCERS Trustees, either to the Board or to their regular employment positions. On the NYCERS Board, each borough president has a one-fifth vote, and each of the other members has one vote. Thus, the eleven Trustees collectively have seven votes, with a three and three-fifths majority of the votes required for the Board to take any action. The concurrence of one employee representative and one non-employee representative member or members entitled to one vote is necessary for any decision by the NYCERS Board (New York City Administrative Code §13-103(d)). Under this statutory scheme, the Comptroller, with only one seat out of eleven, and one vote out of seven, does not control the NYCERS Board or NYCERS itself.

NYC TRS is a public employee retirement system for the teachers in the public schools of New York City and certain other specified school and college employees. The NYC TRS Board of Trustees ("NYC TRS Board") consists of seven members: the Comptroller; the Schools Chancellor; two other Mayoral appointees; and three members of the Teachers' Retirement Association (New York City Administrative Code §13-507). Beyond appointing the Comptroller's own representative, the Comptroller does not appoint, or approve the appointment of, any of the other NYC TRS Trustees, either to the Board or to their regular employment positions. Each Board member has one vote, with a majority vote required for action, and with the concurrence of the Comptroller or of one member appointed by the Mayor, of a member elected by the Teachers' Retirement Association, and of at least two other members needed for any decision by the NYC TRS Board (New York City Administrative Code §13-512). Under this statutory scheme, the Comptroller, with only one seat and one vote, out of seven, does not control the NYC TRS Board or NYC TRS itself.

The Police Fund is a public employee retirement system for New York City police officers. The Police Fund Board of Trustees ("Police Board") consists of twelve members: the Comptroller; three Mayoral appointees, including the Police Commissioner; and eight public employee representatives (New York City Administrative Code §13-216(a)). Beyond appointing the Comptroller's own representative, the Comptroller does not appoint, or approve the appointment of, any of the other Police Trustees, either to the Board or to their regular employment positions. On the Police Board, various members have multiple or fractional votes, such that the twelve Trustees collectively have twelve votes, with the Comptroller having one and one-half votes. A seven-twelfths majority of the votes is required for the Board to take any action. (Id, §13-216(b)). Once again, under this statutory scheme, the Comptroller, with only one seat out of twelve, and one and one-half votes out of twelve, does not control the Police Board or the Police Fund itself.

The Fire Fund is a public employee retirement system for New York City firefighters and fire officers. The Fire Fund Board of Trustees ("Fire Board") consists of twelve members: the Comptroller; three members appointed by the Mayor, including the Fire Commissioner; and eight public employee representatives (New York City Administrative Code §13-302(a)). Beyond appointing the Comptroller's own representative, the Comptroller does not appoint, or approve the appointment of, any of the other Fire Trustees, either to the Fire Board or to their regular employment positions. On the Fire Board, various members have multiple votes, such that the twelve Trustees collectively have twenty-four votes, with the Comptroller having three votes. A seven-twelfths majority of the votes is required for the Board to take any action. Once again, under this statutory scheme, the Comptroller, with only one seat out of twelve, and three votes out of twenty-four, does not control the Fire Board or the Fire Fund itself.

BERS is a public employee retirement system for those employees of the New York City School District and Department of Education that are not covered by the other Systems. The BERS Board of Trustees ("BERS Board") consists of fifteen members: two public employee representatives; and thirteen members of the Panel for Education Policy, including: the Schools Chancellor; seven other members appointed by the Mayor; and one member appointed by each of the five borough presidents (BERS Rules, adopted pursuant to NYS Education Law §§2575(1)(a) and 2590-g). The Comptroller does not appoint, or approve the appointment of, any of the BERS Trustees, either to the Board or to their regular employment positions. Unlike for NYCERS, NYC TRS, the Police Fund, and the Fire Fund, the Comptroller does not serve as a Trustee of BERS, further disproving any claim that BERS is under the control of, or is the alter ego of, the

Comptroller.

Overall, NYCTRS, NYCERS, the Police Fund, the Fire Fund, and BERS are five entirely separate legal entities that serve entirely separate memberships. Each System is statutorily created, with a fiduciary duty to act in the best interests of its own distinct beneficiaries. The five respective Boards are independent and have substantially different Trustee memberships. The Comptroller has no seat on the BERS Board, only one seat out of at least seven on the other four Boards, and never more than one-seventh of the total votes on each of those four Boards. The Comptroller, who is elected separately from the Mayor, has fewer votes than the Mayor's representatives on all Boards but NYCERS, and always has fewer votes than the employees' representatives. Each of NYCERS, NYC TRS, the Police Fund, the Fire Fund, and BERS occupies its own completely separate office, at five different addresses, in two different boroughs of New York City (Manhattan and Brooklyn), with different staffs. None of the Systems shares an office or staff or an address or phone lines either with any other System or with the Office of the Comptroller.

On all of the key investment and proxy decisions for the Systems, the ultimate authority resides with the Board of Trustees of each System. Each of NYCERS, NYC TRS, the Police Fund, the Fire Fund and BERS retains its own outside general investment consultant, which is different for each System, and which consultant provides strategic advice on investment choices, as well as on the selection and performance of the Systems' outside investment managers. Each Board also selects its own outside investment managers, which are responsible for investing the Systems' assets, and which may work for all or most of the Systems, or for just one System. The Systems also have different asset allocations, set by each Board, among equity, fixed-income, real estate, private equity, and so forth.

While the Comptroller is custodian of assets and investment advisor for all of the five Systems, the Comptroller's activities in these roles are primarily to advise the independent Boards and then to carry out their decisions. Those activities do not make him the alter ego of the Systems or give him control over them. As custodian of assets, the Comptroller interacts with the Systems' custodian bank, the Bank of New York, and monitors the bank's custodial activities. The Bank of New York maintains separate accounts for each System and its managers, as evidenced by the fact that Blockbuster attached to its January 12 letter the separate proof of share ownership letters that the Bank of New York furnished for each System in connection with the Proposals. As investment advisor to the five Systems, the Comptroller, through staff, advises and makes recommendations to those Boards on such issues as investments, the selection of consultants, managers, and investment partners, and asset allocations and rebalancing. Each Board, after receiving advice from the Comptroller and other sources, then makes the final decision for that System on each such matter. The Comptroller then takes the steps necessary to carry out the investment and other decisions that each Board makes, and thereafter monitors the investments, as well as the performance of consultants, managers, and investment partners.

On proxy issues, each System has its own proxy committee with responsibility for establishing proxy voting guidelines and shareholder proposal programs on behalf of its respective Board of Trustees. The NYC TRS proxy voting guidelines have substantial differences from those of the other Systems; the proxy voting guidelines of the other four Systems also differ from each other on certain proxy issues. The Comptroller gives advice and makes recommendations to the Boards and the proxy committees on shareholder proposals and voting. The different Boards and proxy committees then give the Comptroller directions on which proposals to submit for which Systems, and how to vote on various contested matters. Based upon the respective directions from the Systems, the Comptroller submits shareholder proposals on their behalf. For many years, the Comptroller has submitted some proposals on behalf of all Systems, and others on behalf of just one or two Systems. This has resulted a number of times in more than one proposal being submitted to one company, on behalf of different Systems. For example, in 2006, on behalf of different Systems, the Comptroller submitted two proposals to each of ICOS Corp. and BEA Systems, each of which was placed on the ballot, and each of which received a shareholder vote of between 36.6% and 75%. (See "Thompson Issues Report on Pension Funds' 2006 Shareholder Proposals" at www.comptroller.nyc.gov) To further carry out the Boards' proxy programs, the Comptroller's staff attends shareholder meetings, and communicates on behalf of the various Systems (as in this letter) with SEC Staff. That role of the Comptroller, in recommending shareholder proposals to the independent Systems, and then carrying out the Systems' instructions, does not show, as Blockbuster's January 12 letter claims (p. 2), that the Comptroller has "control over the content of the proposals," much less control over any of the Systems.

In sum, viewed in terms of both the membership and voting power on the respective Boards, and the Systems' investment and proxy procedures, the Systems are under the control of their independent Boards, not of the Comptroller. Thus, in submitting proxy proposals on behalf of the five Systems, the Comptroller acts at the varying directions of five separate and independent major institutional shareholders, and not as the "alter ego" or control person of any of them.

The facts above as to separateness and independence of each of the Systems belie Blockbuster's assertions that there is only "a single beneficial owner of the securities held by each Stockholder" and "a single originating proponent for the proposals." (Blockbuster January 12 letter at p. 3). Rather, when the Office of the Comptroller submitted, respectively, one proposal for NYC TRS, the Police Fund, the Fire Fund, and BERS, and one proposal for NYCERS, it did so as the agent of each separate and independent proponent System, at the direction of each System. There was no "single beneficial owner" or "single proponent" submitting multiple proposals.

Where, as here, a company cannot establish that one proponent is merely the "alter ego" of another, the Staff of the Division has repeatedly refused to regard the two as one proponent impermissibly submitting two proposals, and has not issued no-action advice under Rule 14a-8(c). See EMC Corporation (March 14, 2002) (rejecting company argument that because Walden Asset Management had worked with several other shareholders on submitting multiple proposals, Walden should be viewed as the one "true proponent" that had impermissibly submitted multiple proposals) See also MOD-PAC Corp. (March 2, 2004); TF Financial Corporation (Jan. 28, 1999); LSB Industries, Inc. (March 28, 1997);

Intergraph Corporation (March 2, 1995).

The letters in which no-action advice has been issued under Rule 14a-8(c) typically have grown out of literal parent-and child situations which bear no comparison to the facts here of five independent multi-billion dollar public pension funds.

BankAmerica Corporation (Feb. 8, 1996) and Peregrine Pharmaceuticals (July 28, 2006) each involved a parent acting for a child, while Jefferson-Pilot Corporation (March 12, 1992) involved as proponents one individual and a company whose only shareholders were her three children, and which she funded and her husband controlled.

Finally, there is no basis for the Company's argument in its supplemental letter of January 19, 2007, that by not responding to the Company's December 26, 2006 demand that the Systems "withdraw[] one or both of your proposals at your earliest opportunity," the Systems made "a concession that the Proposals, in fact, are procedurally defective under the Proxy Rules." (Company January 19 letter at p. 2). Given that the only response that the Company's December 26 letter sought was the Systems' withdrawal of one or both Proposals, no "concession" can be implied from a decision not to accede to, or otherwise respond to, that improper demand.

Overall, the facts presented above, which show that each System is separate from and independent of the others, and that no System is under the control of the Comptroller, nor under common control with any other System, disprove any contention that any System is the "alter ego" of any other System or of the Comptroller, or that the Systems or the Comptroller have manufactured a subterfuge to evade the requirements of Rule 14a-8(c).

For all of the same reasons, there is no basis for the Company's related argument that the two separate Proposals come from one proponent and so should be considered "one proposal, which exceeds 500 words in violation of Proxy Rule 14a-8(d)." (Company January 12 letter at p. 4). Rather, separate and distinct shareholders, not under common control, submitted the two separate Proposals, each of which individually complies with the 500-word limit and all other requirements.

Accordingly, the Company's requests to exclude the Proposals under Rules 14a-8(c) and (d) should be denied.

It is well-settled that shareholder proposals relating to the executive compensation of the senior executives of a company will not be deemed to relate to the "ordinary business" of the company under Rule 14a-8(i)(7). That standard was first set out in Staff Legal Bulletin 14A (July 12, 2002) ("SLB 14A"), which noted that "Since 1992, we have applied a bright-line analysis to proposals concerning equity or cash compensation," under which:

We do not agree with the view of companies that they may exclude proposals that concern only senior executive and director compensation in reliance on rule 14a-8(i)(7):

Id. (emphasis in original; footnote omitted). The Staff Bulletin continued, in relevant part:

Consequently, in view of the widespread public debate regarding shareholder approval of equity compensation plans and consistent with our historical analysis of the "ordinary business" exclusion, we are modifying our treatment of proposals relating to this topic. Going forward, we will take the following approach to rule 14a-8(i)(7) submissions concerning proposals that relate to shareholder approval of equity compensation plans:

Proposals that focus on equity compensation plans that may be used to compensate only senior executive officers and directors. As has been our position since 1992, companies may not rely on rule 14a-8(i)(7) to omit these proposals from their proxy materials.

Id. (emphasis in original; footnotes omitted).

The Staff has continued to apply such criteria in declining to issue no-action advice under Rule 14a-8(i)(7) with respect to shareholder proposals that focus on compensation of only senior executive officers and directors. For example, in Sara Lee Corp. (Sept. 11, 2006), Staff did not concur that Rule 14a-8(i)(7) could be used as a basis to exclude a proposal that stockholders be given the opportunity at each annual meeting to vote on an advisory resolution to approve the Compensation Discussion and Analysis.* See also Avaya, Inc. (Oct. 18, 2006) (Rule 14a-8(i)(7) not a basis to exclude proposal seeking a standard of pay-for-superior-performance in the company's executive compensation plan for senior executives); Emerson Electric Co. (Oct. 24, 2005) (Rule 14a-8(i)(7) not a basis to exclude proposal seeking shareholder approval of future severance agreements with senior executives that provide benefits exceeding a certain threshold); SBC Communications, Inc. (Jan. 25, 2005) (Rule 14a-8(i)(7) not a basis to exclude proposal seeking a review of, and report on, special executive compensation). Cf. Xerox Corp. (March 14, 2006) (proposal for performance-based compensation could be excluded under Rule 14a-8(i)(7) unless proponent amended it to specify that it applied to "compensation of executive officers only").

NYCERS' Proposal here meets the standards for a compensation proposal that may not be excluded as relating to "ordinary business" under Rule 14a-8(i)(7). It relates on its face to executive compensation, and within the area of executive compensation, only to the "named executive officers." According to the September 2006 Final Rules Release, "Executive Compensation and Related Person Disclosure," for purposes of executive compensation disclosure, the "named executive directors" of a company are just five individuals:

As proposed, we are amending the disclosure rules so that the principal executive officer, the principal financial officer and the three most highly compensated executive officers other than the principal executive officer and principal financial officer comprise the named executive officers.

71 Federal Register 53158, 53189, Release No. 34-54302A (Sept. 8, 2006) (footnote omitted). Accordingly, under the aforementioned well-settled standards, NYCERS' proposal on executive compensation, limited to just five Company executive officers, may not be omitted from the 2007 Proxy Materials under Rule 14a-8(i)(7).

The arguments in the Company's January 12 letter do not support any different outcome. While it is correct that, as the letter notes, state corporation law and the Company Charter and By-Laws give the Board the power to set executive compensation (p. 5), the explicitly advisory, non-binding vote on executive compensation sought by the Proposal would not infringe upon or diminish the Board's power, or impinge upon "ordinary business," as the Company appears to suggest. Furthermore, state corporation laws and companies' charters and by-laws will almost always give corporate boards the power to set executive compensation and yet, as noted earlier, the Staff has repeatedly advised that executive compensation does not relate to "ordinary business."

Blockbuster next argues that the factors used in to setting the executive compensation of the named executive officers are so complex that "the general shareholder population" could not make an informed judgment on the subject, and so proposals on the subject should be excluded as "ordinary business." (January 12 letter at pp. 5-6). That argument must fail, given the care that the Commission has devoted to ensuring, in the September 2006 Final Rules Release, "Executive Compensation and Related Person Disclosure," supra, and elsewhere, that the executive compensation disclosures for those five officers are presented in such a manner that shareholders can indeed understand them and appreciate their significance. It must follow that shareholders would then be able to express their purely advisory view on whether to ratify such compensation, as so disclosed. And, again, notwithstanding that executive compensation may sometimes be a complex issue, the Staff has consistently advised that it does not relate to ordinary business.

Next, the Company seeks to distinguish the whole consistent body of Staff advice on executive compensation by asserting that here, the Proposal relates to the "specific individual compensation" of the named executive officers, rather than to a broader "compensation plan." (January 12 letter at p.6). However, given that the Commission's new Executive Compensation Rules themselves focus on the "specific individual compensation" of the named executive officers, a proponent may properly request that a shareholder advisory vote focus on that same disclosure. Moreover, the Company has not identified any aspect of those executive compensation disclosures that makes them an improper subject for an

advisory vote.

Finally, the Company claims that because the NYSE does not require an advisory shareholder vote on executive compensation, and the Commission allegedly lacks authority to impose such a requirement on companies, then allowing the shareholders themselves to request such a vote would serve to "subterfuge federal laws and the NYSE Rules." (January 12 letter at p. 6). The argument ignores the fact that shareholder proposals routinely request enhanced corporate governance practices precisely because the Rules of the NYSE, NASD, etc. currently do not require them. Such proposals to improve corporate governance are entirely proper, as is the Proposal here.*

For all of the above reasons, NYCERS' Proposal relating to the executive compensation of the named executive directors does not relate to the ordinary business of the Company, and so cannot be excluded under Rule 14a-8(i)(7).

The Division's recent Bulletin sought to limit the excessive use by companies of the "false and misleading" standard of Rule 14a-8(i)(3) as a purported basis for exclusion of shareholder proposals. Staff Legal Bulletin 14B (September 15, 2004) ("SLB 14B"). The Staff was concerned that "many companies have begun to assert deficiencies in virtually every line of a proposal's supporting statement as a means to justify exclusion of the proposal in its entirety." Id. The Bulletin noted that this causes the Staff to devote significant resources to review and editing. Here, all of the Company's four claims that the Proposals are false and misleading are strained and makeweight arguments, and should not have been raised under the standards enunciated in SLB 14B.

The challenged statements in the respective Proposals, and the reasons why each one is true, are as follows:

1. "Mushrooming executive compensation."

The Company claims that this phrase falsely "implies that the executive compensation of all companies, including the Company, has increased disproportionately and exponentially...". It is true, however, and not false or misleading, to state that executive compensation at public companies increased greatly in recent years. The mild simile"mushrooming" is thus wholly apt. Indeed, using his own simile, Chairman Cox recently testified before Congress that "non-salary forms of compensation have ballooned since the early 1990s...". "Testimony Concerning Options Backdating" by Christopher Cox, SEC Chairman, before the U.S. Senate Committee on Banking, Housing and Urban Affairs, September 6, 2006 (emphasis added), at sec.gov/news/testimony/2006/ts090606cc.htm. As Commissioner Campos further observed in a recent speech, as to the substantial increases in executive pay, "In 1982, the pay ratio between CEOs and the average employee was 42:1; in 2004, this figure apparently increased to over 400:1." "Remarks Before the 2007 Summit on Executive Compensation" by SEC Commissioner Roel C. Campos, January 23, 2007, at sec.gov/news/speech/2007/spch012307rcc.htm.

As to the Company itself, nothing in the Proposal makes any reference to any increase of any kind in executive compensation at the Company itself. Blockbuster's counsel's claim of such an implication is without any support, and should be disregarded.

2. "Additionally, recent media attention to questionable dating of stock options by companies has raised investor concerns."

The Company claims that this falsely "implies that improper dating of stock options is widespread" and "indirectly makes charges against the Company concerning improper executive compensation...". That the "improper dating of stock options is widespread" is truc, and is not false or misleading. The same September 2006 testimony by Chairman Cox before

Congress, cited above, made that point:

Thank you for inviting me to testify today about options backdating. This issue is one of intense public interest because it strikes at the heart of the relationship among a public company's management, its directors, and its shareholders...

***

...Over the past several years, our inventory of backdating and related investigations has grown substantially...

***

Unfortunately, these cases that I've used as illustrations are not the only matters the SEC has under investigation. The SEC's Division of Enforcement is currently investigating over 100 companies concerning possible fraudulent reporting of stock option grants. The companies are located throughout the country, and include Fortune 500 companies as well as smaller cap issuers. They span multiple industry sectors.

"Testimony Concerning Options Backdating" by Christopher Cox, SEC Chairman.

With respect to the alleged implication as to the Company, the Proposal, once again, makes no reference of any kind to options backdating -- or to any other improper executive compensation -- at the Company itself. Blockbuster's counsel's claim, that the Proposal "indirectly makes charges" against the Company, lacks any support, and should be disregarded.

3. "Shareholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages."

The Company claims that the above is false because an individual shareholder can write to company directors, call its hotline, or vote on the election of directors. None of those acts, however, both 1) serves as a collective mechanism for shareholders as a group; and 2) provides feedback on individual executives' pay packages. It is entirely true, and not false or misleading, that to accomplish both aims at the same time, a new mechanism, such as the advisory vote on executive compensation requested by in the Proposal, is needed.

4. "Submitted by William C. Thompson, Jr., Comptroller, City of New York, on behalf of the Boards of Trustees of the New York City Pension Funds."

The Company claims that this statement is false because. "The Proponent is the custodian for four Stockholders and does not purport to be the custodian for the entirety of the pension funds related to New York City." (January 12 letter at p. 8). The phrasing of the Company's letter is confusing, as the "Proponents" are the Systems, not the Comptroller, who simply submitted the Proposal on the Systems' behalf. However, if the Company's assertion is that the Comptroller is custodian for only four Systems, the Company is wrong, as the Comptroller is indeed the custodian of assets for all five Systems. If the Company's assertion is that "New York City Pension Funds" does not accurately describe Proponents who are four of the five New York City Systems, we submit that it is a fair and proper shorthand for the Proposal to state that it was submitted on behalf of "the New York City Pension Funds" rather than listing each of the four proponent Systems separately by name.

In short, each of the four challenged statements in the respective Proposals is demonstrably true, and is not false or misleading. The Company has wholly failed to meet its burden for exclusion under Rule 14a-8(i)(3).

For the reasons set forth herein, the five Systems respectfully submit that the Company's request for "no-action" relief should be denied. Should you have any questions or require any additional information, please do not hesitate to contact me at the number listed above.

Thank you for your consideration.

Sincerely,

/s/

Richard S. Simon

Cc: Robert L. Kimball, Esq.
Vinson & Elkins LLP
Trammel Crow Center
2001 Ross Avenue, Suite 3700
Dallas, TX 75201-2975

* The Staff did require under Rule 14a-8(i)(3) that the proponent amend the original proposal which had instead sought a vote on the "report of the Compensation and Employee Benefits Committee." Id.

* Indeed, it is by showing that such proposals do go beyond what the NYSE Rules require, that proponents have defeated companies' arguments that through compliance with an analogous NYSE Rule, the companies have "substantially implemented" the proposals. See, e.g., Clear Channel Communications, Inc. (Feb. 15, 2006) (NYC Systems' proposal calling for heightened independence standard for directors on compensation committee was not substantially implemented by Company adherence to NYSE Rules, where proposal's independence standard was stricter than NYSE's).

March 12, 2007

The first proposal urges the board to adopt a policy that shareholders be given the opportunity at each annual meeting to vote on an advisory resolution to ratify the compensation of the named executive officers set forth in the summary compensation table of the company's proxy statement.

The second proposal asks Blockbuster to take the necessary steps to declassify the board and establish annual elections of directors.

We are unable to concur in your view that Blockbuster may exclude the proposals under rule 14a-8(c). Accordingly, we do not believe that Blockbuster may omit the proposals from its proxy materials in reliance upon rule 14a-8(c).

We are unable to concur in your view that Blockbuster may exclude portions of the supporting statement of the first or second proposal under rule 14a-8(i)(3). Accordingly, we do not believe that Blockbuster may omit portions of either supporting statement from its proxy materials in reliance upon rule 14a-8(i)(3).

We are unable to concur in your view that Blockbuster may exclude the first proposal under rule 14a-8(i)(7). Accordingly, we do not believe that Blockbuster may omit the first proposal from its proxy materials in reliance upon rule 14a-8(i)(7).

Sincerely,

/s/

Amanda McManus
Attorney-Adviser