NEW YORK (Bloomberg) - Blockbuster Inc., the world's largest video-rental chain, expects that within the next few years, half of its revenue will come from customers purchasing movies and games rather than borrowing them.

"It's a reasonable expectation," CEO James Keyes said in an interview today. "Retail is really a hedge against some day the possible decline in a rental model."

Merchandise sales represented 24 percent of the video chain's revenue for the nine months through September 30, Blockbuster said. The majority comes from rentals.

Blockbuster is seeking to increase its in-store sales as the number of ways consumers can obtain movies has increased. Customers can rent DVDs online at Netflix Inc. and have them delivered by mail, download TV shows at Amazon.com Inc. or watch video-on-demand through their local cable channel. Some companies offer self-service kiosks that rent DVDs.

Retail "allows the stores to have a reason for continued existence even if DVD rentals should eventually go away," Mr. Keyes said.

Blockbuster fell 14 cents, or 2.9 percent, to $4.70 in New York Stock Exchange composite trading. The shares have dropped 11 percent this year.