The Associated Press

DALLAS - Shares of Blockbuster Inc. jumped Friday after a report that the video-rental giant is in the early stages of talks about a possible merger with Columbia House, the mail-order music and movie retailer.

The Wall Street Journal, citing people familiar with the matter, reported that the idea of a merger emerged in recent weeks.

The paper said it was not clear whether Blockbuster would issue stock and buy the much smaller Columbia House, or whether Columbia House's owner, Blackstone Group LP, would buy out Viacom Inc.'s 80 percent stake in Blockbuster.

Investment bankers have said Dallas-based Blockbuster and its chief executive, John Antioco, are looking at other deals, including merging with an Internet retailer or a video-game chain.

The report sent Blockbuster shares up 83 cents to close at $22.25 on the New York Stock Exchange. Viacom shares fell $1.60 to close at $42.05.

Randy Hargrove, a spokesman for Blockbuster, would neither confirm nor deny the report.

"We are open to any option that improves Blockbuster's competitive position and supports the company's long-term strategic goals," including increasing rentals and sales of movies, Hargrove said.

Viacom declined to comment.

A Blockbuster-Columbia House merger could create a strong retailer of DVDs to compete with mass merchants, who have boosted sales of digital video discs by slashing prices.

Blockbuster controls about 40 percent of the U.S. rental market but is threatened by the growth of home video-on-demand and surging sales of cheap DVDs, which have cut into rentals.

Blackstone acquired a majority stake in Columbia House last year for $410 million.