The boycott started when Warner announced it would no longer maintain a "window", or gap, between releasing films for rent and for retail.

Blockbuster was angry it had to pay a higher price for Warner rental DVDs without being given a chance to rent them to customers before they were available for sale.

Although studios would like to see it go away, Brits like renting John Hayward, Home Entertainment Week

The deal is expected to have widespread impact on the rental market in the UK, leading to a decline in video and DVD rentals and an increase in sales.

The terms of the agreement between the firms were not announced.

Neil McEwan, managing director of Warner Home Video, told Screen Daily: "It is important that our titles are available in Blockbuster UK.

"We want customers to be able to rent or buy the titles they want, when they want, from the outlet of their choice."

Analysts

Alex Sparks, senior vice president and managing director for Blockbuster UK, told the film industry website: "We are pleased with this agreement which we believe protects the long term interests of our customers."

Industry analysts told Screen Daily that the deal could lead to an end to all rental windows, which would in turn hit video wholesalers and rental chains.

It also reported that 20th Century Fox had dropped its rental window and that Universal, Paramount and Columbia were expected to follow suit.

At the heart of the issue is the fact DVD sales and pay-per-view video are becoming increasingly important to film studios.

DVD sales have exploded in the last two years, generating huge incomes for film studios while pay-per-view video has also increased.

But the rental trade says its income remains steady, despite the increase in DVD film sales.

John Hayward, of Home Entertainment Week, told Screen Daily: "Although studios would like to see it go away, Brits like renting.

"Not everyone wants to buy everything. Renting is a good way of sampling or indeed simply consuming films."