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                                                                   EXHIBIT 10.16

                                                          As of January 1, 1998


Alva J. Phillips, Jr.
4721 Star Ridge Lane
Frisco, TX 75034

Dear Joe:

     Blockbuster Entertainment Group ("Blockbuster"), a business unit of Viacom
Inc. ("Viacom"), currently having an address at 1201 Elm Street, Dallas, Texas
75270, agrees to employ you and you agree to accept such employment on the terms
and conditions set forth herein.

     1.   Term. The term of your employment hereunder shall commence on January
1, 1998 and, unless terminated by Blockbuster pursuant to paragraph 8 hereof,
shall continue through and until June 30, 2001. The period from January 1, 1998
through June 30, 2001 shall hereinafter be referred to as the "Employment Term"
notwithstanding any earlier termination pursuant to paragraph 8.

     2.   Duties. During the Employment Term, you agree to devote your entire
business time, attention and energies to the business of Blockbuster. You will
be Blockbuster's Executive Vice President, and Chief Information Officer and you
agree to perform such duties, and such other duties reasonable and consistent
with such office as may be assigned to you from time to time by the Chief
Operations Officer of Blockbuster or such other individual as may be designated
by the Chairman and Chief Executive Officer of Blockbuster (the "CEO"). Your
principal place of business shall be in the greater metropolitan Dallas, Texas
area.

     3.   Compensation.

          (a)  Salary. For all the services rendered by you in any capacity
hereunder, Blockbuster agrees to pay you the sum of Three Hundred Sixty Five
Thousand Dollars ($365,000) per annum ("Salary"), payable in accordance with
Blockbuster's then effective payroll practices. Your Salary will be reviewed
during the first quarter of each calendar year during the Employment Term,
commencing with the first quarter of 1999, and will, at that time, be increased
by a percentage that is generally consistent with the range of percentages by
which the salaries of other comparable executives are then increased. For 1999,
2000, and 2001, your annual salary increase will be no less than $20,000 per
year.

          (b)  Bonus. In addition to your Salary, you shall be entitled to
receive bonus compensation for each of the calendar years during the Employment
Term, determined and payable as follows ("Bonus"):

               (i)    Your Bonus for each of the calendar years during the
                      Employment Term will be based upon a measurement of
                      performance against objectives in accordance with the
                      Viacom
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                      Short-Term Incentive Plan, as the same may be amended from
                      time to time.

               (ii)   Your Target Bonus for each of the calendar years during
                      the Employment Term shall be 50% of Salary which may be
                      prorated for any partial calendar year during the
                      Employment Term.

               (iii)  Your Bonus for any calendar year shall be payable by
                      February 28 of the following year.

     4.   Benefits. You shall be entitled to participate in such vacation,
medical, dental and life insurance, 401(k), pension and other plans as
Blockbuster may have or establish from time to time and in which you would be
entitled to participate pursuant to the terms thereof. The foregoing, however,
shall not be construed to require Blockbuster to establish any such plans or to
prevent the modification or termination of such plans once established, and no
such action or failure thereof shall affect this Agreement. It is further
understood and agreed that all benefits you may be entitled to as an employee of
Blockbuster shall be based upon your Salary, as set forth in paragraph 3(a)
hereof, and not upon any bonus compensation due, payable or paid to you
hereunder, except where the benefit plan expressly provides otherwise.

     5.   Business Expenses. During your employment with Blockbuster, you shall
be reimbursed for such reasonable travel and other expenses incurred in the
performance of your duties hereunder as are customarily reimbursed to comparable
executives of Blockbuster. You shall be entitled to a car lease in accordance
with Blockbuster's policy.

     6.   Exclusive Employment, Confidential Information. Etc.

          (a)  Non-Competition. You agree that your employment hereunder is on
an exclusive basis, and that as long as you are employed by Blockbuster, you
will not engage in any other business activity which is in conflict with your
duties and obligations hereunder. You agree that during the Employment Term and
for a period of one (1) year thereafter you shall not directly or indirectly
engage in or participate as an owner, partner, shareholder, officer, employee,
director, agent of or consultant for any business that competes with any of the
principal business activities of Blockbuster; provided, however, that nothing
herein shall prevent you from investing as less than a one percent (1%)
shareholder in the securities of any company listed on a national securities
exchange or quoted on an automated quotation system. Notwithstanding anything to
the contrary in this Agreement, your obligations under the second sentence of
this paragraph 6(a) shall survive a termination of your employment with
Blockbuster and remain in full force and effect for the period set forth therein
regardless of the reason for your termination (or lack thereof).

          (b)  Confidential Information. You agree that you shall not, during
the Employment Term or at any time thereafter, use for your own purposes, or
disclose to or for the benefit of any third party, any trade secret or other
confidential information of Blockbuster,

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Viacom or any of Viacom's affiliates (except as may be required by law or in
the performance of your duties hereunder consistent with Blockbuster's policies)
and that you will comply with any confidentiality obligations of Blockbuster or
Viacom to a third party, whether under agreement or otherwise. Notwithstanding
the foregoing, confidential information shall be deemed not to include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by you or any other person who directly or
indirectly receives such information from you or at your direction or (ii) is or
becomes available to you on a non-confidential basis from a source which is
entitled to disclose it to you.

          (c)  No Employee Solicitation. You agree that, during the Employment
Term and for one (1) year thereafter, you shall not, directly or indirectly,
engage, employ, or solicit the employment of any person who is then or has been
within six (6) months prior thereto, an employee of Blockbuster, Viacom or any
of Viacom's affiliates.

          (d)  Blockbuster Ownership. The results and proceeds of your services
hereunder, including, without limitation, any works of authorship resulting from
your services during your employment with Blockbuster, Viacom and/or any of
Viacom's affiliates and any works in progress, shall be works-made-for-hire and
Blockbuster shall be deemed the sole owner throughout the universe of any and
all rights of whatsoever nature therein, whether or not now or hereafter known,
existing, contemplated, recognized or developed, with the right to use the same
in perpetuity in any manner Blockbuster determines in its sole discretion
without any further payment to you whatsoever. If, for any reason, any of such
results and proceeds shall not legally be a work-for-hire and/or there are any
rights which do not accrue to Blockbuster under the preceding sentence, then you
hereby irrevocably assign and agree to assign any and all of your right, title
and interest thereto, including, without limitation, any and all copyrights,
patents, trade secrets, trademarks and/or other rights of whatsoever nature
therein, whether or not now or hereafter known, existing, contemplated,
recognized or developed to Blockbuster, and Blockbuster shall have the right to
use the same in perpetuity throughout the universe in any manner Blockbuster
determines without any further payment to you whatsoever. You shall, from time
to time, as may be requested by Blockbuster, do any and all things which
Blockbuster may deem useful or desirable to establish or document Blockbuster's
exclusive ownership of any and all rights in any such results and proceeds,
including, without limitation, the execution of appropriate copyright and/or
patent applications or assignments. To the extent you have any rights in the
results and proceeds of your services that cannot be assigned in the manner
described above, you unconditionally and irrevocably waive the enforcement of
such rights. This paragraph 6(d) is subject to, and shall not be deemed to
limit, restrict, or constitute any waiver by Blockbuster of any rights of
ownership to which Blockbuster may be entitled by operation of law by virtue of
Blockbuster being your employer.

          (e)  Litigation. You agree that, during the Employment Term, for one
(1) year thereafter and, if longer, during the pendency of any litigation or
other proceeding, (i) you shall not communicate with anyone (other than your own
attorneys and tax advisors and, except to the extent necessary in the
performance of your duties hereunder) with respect to the

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facts or subject matter of any pending or potential litigation, or regulatory or
administrative proceeding involving Blockbuster or Viacom or any of their
officers, directors, agents, employees, suppliers or customers, other than any
litigation or other proceeding in which you are a party-in-opposition, without
giving prior notice to Blockbuster's General Counsel, and (ii) in the event that
any other party attempts to obtain information or documents from you with
respect to matters possibly related to such litigation or other proceeding, you
shall promptly so notify Blockbuster's General Counsel.

          (f)  No Right to Give Interviews or Write Books, Articles, Etc. You
agree that during the Employment Term and for a period of one (1) year
thereafter, except as authorized by Blockbuster or Viacom, you shall not (i)
give any interviews or speeches, or (ii) prepare or assist any person or entity
in the preparation of any books, articles, television or motion picture
productions or other creations, in either case, concerning Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents,
employees, suppliers or customers.

          (g)  Return of Property. All documents, data, recordings, or other
property, whether tangible or intangible, including all information stored in
electronic form, obtained or prepared by or for you and utilized by you in the
course of your employment with Blockbuster shall remain the exclusive property
of Blockbuster. In the event of the termination of your employment for any
reason, Blockbuster reserves the right, to the extent permitted by law and in
addition to any other remedy Blockbuster may have, to deduct from any monies
otherwise payable to you the following: (i) the full amount of any debt you owe
to Blockbuster, Viacom or any of Viacom's affiliates at the time of or
subsequent to the termination of your employment with Blockbuster, and (ii) the
value of the Blockbuster property which you retain in your possession after the
termination of your employment with Blockbuster. In the event that the law of
any state or other jurisdiction requires the consent of an employee for such
deductions, this Agreement shall serve as such consent. You acknowledge and
agree that the foregoing remedy shall not be the sole and exclusive remedy of
Blockbuster with respect to a breach of this paragraph 6(g).

          (h)  Non-Disparagement. You agree that you shall not, during the
Employment Term and for a period of one (1) year thereafter, criticize, ridicule
or make any statement which disparages or is derogatory of Blockbuster, Viacom
or any of Viacom's affiliates or any of their officers, directors, agents or
employees.

          (i)  Injunctive Relief. Blockbuster has entered into this Agreement in
order to obtain the benefit of your unique skills, talent, and experience. You
acknowledge and agree that any violation of paragraphs 6(a) through (h) hereof
will result in irreparable harm to Blockbuster and Viacom for which damages are
not readily ascertainable. Accordingly, you agree that Blockbuster and/or Viacom
may obtain injunctive and other equitable relief for any breach or threatened
breach of such paragraphs, in addition to any other remedies available to
Blockbuster and/or Viacom.

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          (j)  Survival; Modification of Terms. Your obligations under
paragraphs 6(a) through (i) hereof shall remain in full force and effect for the
entire period provided therein notwithstanding the termination of the Employment
Term pursuant to paragraph 8 hereof or otherwise. You and Blockbuster agree that
the restrictions and remedies contained in paragraphs 6(a) through (i) are
reasonable and that it is your intention and the intention of Blockbuster that
such restrictions and remedies shall be enforceable to the fullest extent
permissible by law. If it shall be found by a court of competent jurisdiction
that any such restriction or remedy is unenforceable but would be enforceable if
some part thereof were deleted or the period or area of application reduced,
then such restriction or remedy shall apply with such modification as shall be
necessary to make it enforceable.

     7.   Incapacity. In the event you become medically disabled and cannot
substantially perform your duties at any time during the Employment Term, the
CEO, at any time after such disability has continued for 30 consecutive days,
may determine that Blockbuster requires such duties and responsibilities be
performed by another executive. In the event you become disabled, you will first
receive benefits under Blockbuster's short-term disability program for the first
26 weeks of consecutive absence in accordance with its terms. Thereafter, you
will be eligible to receive benefits under the Blockbuster Long-Term Disability
("LTD") program in accordance with its terms. Upon receipt of benefits under the
LTD program, you will also be entitled to receive a pro-rated Target Bonus for
the calendar year in which such benefits commence.

     8.   Termination.

          (a)  Termination for Cause. Blockbuster may, at its option, terminate
this Agreement forthwith for "cause", and Blockbuster shall thereafter have no
further obligations under this Agreement, including, without limitation, any
obligation to pay Salary or Bonus or provide benefits under this Agreement. For
purposes of this Agreement, "cause" shall mean (i) the commission of a felony or
the commission of any other act involving dishonesty, disloyalty or fraud with
respect to Blockbuster, Viacom or any of Viacom's affiliates, (ii) conduct
bringing, or having the potential to bring, Blockbuster, Viacom or any of
Viacom's affiliates into substantial public disgrace or disrepute, (iii) willful
misconduct with respect to Blockbuster, Viacom or any of Viacom's affiliates, or
(iv) any material breach of this Agreement (including, without limitation, your
failure, neglect of or refusal to substantially perform your obligations
hereunder as set forth in paragraphs 2 and 11 hereof), except in the event of
your disability as set forth in paragraph 7. Anything herein to the contrary
notwithstanding, Blockbuster will give you written notice prior to terminating
this Agreement for your material breach setting forth the exact nature of any
alleged breach and the conduct required to cure such breach. Except for a breach
which by its nature cannot be cured, you shall have ten (10) business days from
the giving of such notice within which to cure.

          (b)  Good Reason Termination. You may terminate your employment
hereunder for "Good Reason" at any time during the Employment Term by written
notice to Blockbuster not more than thirty (30) days after the occurrence of the
event constituting "Good

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Reason". Such notice shall state an effective date no earlier than thirty (30)
business days after the date it is given. Blockbuster shall have ten (10)
business from the giving such notice within which to cure. Good Reason shall
mean (x) the breach by Blockbuster of any of its material obligations hereunder,
or (y) without your prior written consent, other than in connection with the
termination of your employment for "cause" (as defined above) or in connection
with your permanent disability, the assignment to you by Blockbuster or Viacom
of duties substantially inconsistent with the duties of an officer of
Blockbuster.

          (c)  Termination without Cause. Blockbuster may terminate your
employment hereunder without "cause" (as defined above) at any time during the
Employment Term by written notice to you.

          (d)  Termination Payments, Etc. In the event that your employment
terminates pursuant to paragraph 8(b) or 8(c) hereof, you shall be entitled to
receive, subject to applicable withholding taxes:

               (i)    your Salary as provided in paragraph 3(a) until the end of
                      the Employment Term, payable in accordance with
                      Blockbuster's then effective payroll practices;

               (ii)   bonus compensation for each calendar year during the
                      Employment Term equal to your Target Bonus as set forth in
                      paragraph 3(b);

               (iii)  your car lease as provided in paragraph 5 until the end of
                      the Employment Term, payable in accordance with
                      Blockbuster's then effective payroll practices;

               (iv)   medical and dental insurance coverage under Blockbuster's
                      then current benefit plans pursuant to COBRA until the end
                      of the Employment Term or, if earlier, the date on which
                      you become eligible for medical and dental coverage from a
                      third party employer; during this period, Blockbuster will
                      pay an amount equal to the applicable COBRA premiums (or
                      such other amounts as may be required by applicable law)
                      (which amount will be included in your income for tax
                      purposes to the extent required by applicable law); at the
                      end of such period, you may elect to continue your medical
                      and dental insurance coverage at your own expense for the
                      balance, if any, of the period required by law;

               (v)    life insurance coverage pursuant to Blockbuster's then
                      current policies until the end of the Employment Term (the
                      amount of Salary covered by such insurance to be reduced
                      by the amount of any salary payable to you by a third
                      party); and

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               (vi)   stock options granted to you under Viacom's 1994 and 1997
                      Long-Term Management Incentive Plans and any successor
                      plans (collectively, the "LTMIP") which are exercisable on
                      or prior to the date of the termination of your employment
                      under paragraph 8(b) or 8(c) hereof or that would have
                      vested and become exercisable on or before the last date
                      of the Employment Term will be exercisable until six (6)
                      months after the date of such termination or, if earlier,
                      the expiration date of the stock options;

provided, however, you shall be required to mitigate the amount of any payment
provided for in (i), (ii) and (iii) of this paragraph 8(d) by seeking other
employment or otherwise, and the amount of any such payment provided for in (i),
(ii) and (iii) shall be reduced by any compensation earned by you from a third
person except that mitigation shall not be required for twelve (12) months after
the termination of your employment or for the period commencing with the
termination of your employment and ending on the last day of the Employment
Term, whichever is shorter. The payments provided for in (i) above are in lieu
of any severance or income continuation or protection under any Blockbuster or
Viacom plan that may now or hereafter exist. The payments and benefits to be
provided pursuant to this paragraph 8(d) shall constitute liquidated damages,
and shall be deemed to satisfy and be in full and final settlement of all
obligations of Blockbuster to you under this Agreement.

          (e)  Termination of Benefits. Notwithstanding anything in this
Agreement to the contrary (except as otherwise provided in paragraph 8(d) with
respect to medical, dental and life insurance), coverage under all Blockbuster
benefit plans and programs (including, without limitation, vacation, the 401(k)
plan, the pension plan, LTD, car insurance and accidental death and
dismemberment and business travel and accident insurance) will terminate upon
the termination of your employment except to the extent otherwise expressly
provided in such plans or programs.

          (t)  Non-Renewal Notice. Blockbuster shall notify you in writing in
the event that Blockbuster elects not to extend or renew this Agreement. If
Blockbuster gives you such notice less than twelve (12) months before the end of
the Employment Term, or your employment terminates pursuant to paragraph 8(b) or
8(c) hereof during the final twelve (12) months of the Employment Term, you
shall be entitled to receive your Salary as provided in paragraph 3(a), payable
in accordance with Blockbuster's then effective payroll practices, subject to
applicable withholding requirements, for the period commencing after the end of
the Employment Term which, when added to the portion of the Employment Term, if
any, remaining when the notice is given or the termination occurs, equals twelve
(12) months. The payments provided for in this paragraph 8(f) are in lieu of any
severance or income continuation or protection under any Blockbuster or Viacom
plan that may now or hereafter exist. You shall be required to mitigate the
amount of any payment provided for in this paragraph 8(f) by seeking other
employment or otherwise, and the amount of any such

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payment provided hereunder shall be reduced by any compensation earned by you
from a third person.

     9.   Death. If you die prior to the end of the Employment Term, your
beneficiary or estate shall be entitled to receive your Salary up to the date on
which the death occurs and a pro-rated Target Bonus.

     10.  Section 317 and 507 of the Federal Communications Act. You represent
that you have not accepted or given nor will you accept or give, directly or
indirectly, any money, services or other valuable consideration from or to
anyone other than Blockbuster for the inclusion of any matter as part of any
film, television program or other production produced, distributed and/or
developed by Blockbuster, Viacom and/or any of Viacom's affiliates.

     11.  Equal Opportunity Employer. You acknowledge that Blockbuster is an
equal opportunity employer. You agree that you will comply with Blockbuster
policies and applicable federal, state, and local laws prohibiting
discrimination on the basis of race, color, creed, national origin, age, sex or
disability.

     12.  Notices. All notices required to be given hereunder shall be given in
writing, by personal delivery or by mail at the respective addresses of the
parties hereto set forth above, or at such other address as may be designated in
writing by either party, and in the case of Blockbuster, to the attention of the
General Counsel of Blockbuster. Any notice given by mail shall be deemed to have
been given three days following such mailing.

     13.  Assignment. This is an Agreement for the performance of personal
services by you and may not be assigned by you. Blockbuster or Viacom may assign
this Agreement to Viacom or any affiliate of Viacom or any purchaser of all or
substantially all of the assets of Blockbuster or Viacom or any successor in
interest to Viacom or Blockbuster.

     14.  Governing Law. This Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of Texas.

     15.  No Implied Contract. Nothing contained in this Agreement shall be
construed to impose any obligation on Blockbuster to renew this Agreement or any
portion thereof. The parties intend to be bound only upon execution of a written
agreement and no negotiation, exchange of draft or partial performance shall be
deemed to imply an agreement. Neither the continuation of employment nor any
other conduct shall be deemed to imply a continuing agreement upon the
expiration of this Agreement.

     16.  Entire Understanding. This Agreement contains the entire understanding
of the parties hereto relating to the subject matter herein contained, and can
be changed only by a writing signed by both parties hereto.

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     17.  Void Provisions. If any provision of this Agreement, as applied to
either party or to any circumstances, shall be adjudged by a court to be void or
unenforceable, the same shall be deemed stricken from this Agreement and shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.

                                     *****


     If the foregoing correctly sets forth our understanding, please sign and
date one copy of this letter and return it to the undersigned whereupon this
letter shall constitute a binding agreement between us.

                                       Very truly yours,

                                       BLOCKBUSTER ENTERTAINMENT GROUP



                                       By: /s/ STEVEN J. BECKER
                                           ---------------------------
                                           Steven J. Becker
                                           Senior Vice President
                                           Worldwide Human Resources



ACCEPTED AND AGREED:


/s/ ALVA J. PHILLIPS, JR.
-------------------------
Alva J. Phillips, Jr.

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