The two companies expect to have Blockbuster OnDemand service integrated into TiVo DVRs in the second half of 2009.

“Ultimately, our vision is to work with TiVo so that their subscribers can access movies not only through our OnDemand service but also from our stores and through our by-mail service as well. Regardless of a film’s availability – through VOD or on DVD – we want to work with TiVo to provide their subscribers unprecedented access to movie content,” said Jim Keyes, Blockbuster Chairman and CEO

Blockbuster OnDemand will be integrated into TiVo Series2, Series3, TiVo HD, and TiVo HD XL DVRs. In return, Blockbuster will have the honor to sell TiVo equipment at thousands of its stores nationwide as well as online. In addition, the two companies also plans to implement a cross-marketing campaign.

Blockbuster’s service will rent movies for $3.99 (new releases) and for  $2.99  (older titles).  The company has yet to unveil the list of HD on-demand titles.