Pinning its poor Q3 performance primarily on costs related to closure and sell off of over 500 retail stores, video rental service Blockbuster (NYSE: BBI) posted an expanded net loss of $35 million, a 41.7 percent increase from Q306’s $24.7 million loss. Meanwhile, Q3 revenues fell 5.7 percent to $1.24 billion from $1.31 billion in the same period last year.

The net loss was partially offset by a $79.2 million year-over-year revenue gains from Blockbuster’s online rental service, as subscribers totaled 3.1 million by the end of Q3. Blockbuster didn’t offer any details regarding the impact of its August purchase of online rental service Movielink, which was estimated to have cost the company under $20 million it bought for $6.6 million. Other highlights from the quarter included:

-- The company’s operating loss for Q3 totaled $5.6 million, versus operating income of $3.3 million for the same period last year.

-- Gross profit dropped $75.7 million, which Blockbuster attributed to the general decline in revenues and an approximately $29 million impact to rental gross profit related to Total Access, which was introduced to help it compete with rival Netflix, (NSDQ: NFLX) which has about 6.7 million subs. Total Access gives consumers free in-store rentals when they return DVDs they ordered online to a store, as opposed to dropping it in the mail. More to come. Earnings release | Webcast (10 a.m. EDT)