Moving beyond its movie and video game rental business, Blockbuster said this morning that it has started selling retail video games and game hardware to all of its U.S.-owned stores.

The effort is part of a plan to significantly expand its game business and compete with the likes of GameStop and Game Crazy stores. Hopefully, this idea will go over better with shareholders than Blockbuster’s plan to purchase the Circuit City electronics train. But it isn’t clear to me why someone would go to Blockbuster for a smaller selection of games than they could get at a dedicated game store.

Consumers can purchase video game titles, hardware and accessories for the Sony’s PlayStation 3, Microsoft’s Xbox 360, Nintendo Wii and Nintendo DS game systems. Blockbuster will add more rental game titles as well. One notable absence: Sony’s PlayStation Portable.

The timing is linked to sales of some big titles, including Nintendo’s “Mario Kart” game and the soon-to-be-released “Grand Theft Auto IV.”

Blockbuster will have special offers like an exclusive Sony PS3 movie and game bundle.  The bundle, available at corporate-owned stores while supplies last for $499.99, excluding tax, includes: a 40-gigabyte Sony PS3 game console that also plays Blu-ray DVDs, PS3/Blu-ray DVD remote, HDMI cable, “Spiderman 3” Blu-ray disc, “Transformers” PS 3 game and a Blockbuster card which gives a user a free PS3 or Blu-ray rental per week for 12 consecutive weeks.

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