Viacom reported a fourth-quarter net loss of $385.4m compared with a profit of $652m for the same period in 2002.

The loss included a $1.3bn charge from a write-down in Blockbuster's assets.

The video rental company is facing increasingly tough competition from the cheap sales of videos and DVDs through major retailers.

Tax-free spin-off

This is the second time Viacom has said it is to spin off Blockbuster.

Viacom floated shares in Blockbuster in 1999 and said it would sell the rest later, but then decided to hold onto the video rental business for the cash it generated.

Viacom now says it expects to separate Blockbuster in a tax-free split-off, which would most likely involve exchanging its shares for shares of Blockbuster.

The company said the proposal was subject to final approval as well as "an assessment of market conditions".

Blockbuster has said it will be able to operate more effectively as an independent company.