UPDATE 1-Blockbuster to combine dual shares

* Company to combine class A and class B common stock

* Says move will help liquidity

* Blockbuster notified by NYSE of non-compliance

LOS ANGELES, Nov 20 (Reuters) - Blockbuster Inc BBI.N said on Friday that it would change its stock structure in a move the beleaguered U.S. movie rental chain said will improve liquidity.

Blockbuster, the largest U.S. movie rental chain, said in a statement that it would combine its Class A and Class B common stock into a single class of common shares.

The combination must be approved by stockholders at the company's annual meeting in 2010.

It also said that the New York Stock Exchange had notified the company that it was not in compliance with the continued listing standard that requires the average closing price of a company's common stock to be no less than $1 per share over a 30-day trading period.

Blockbuster may explore other options to improve its capital structure in order "to cure the price condition deficiency," the company said in a statement.

Traditional brick-and-morter movie rental chains like Blockbuster have struggled to retain customers going online and using innovative services like Netflix Inc (NFLX.O) and Coinstar Inc's (CSTR.O) Redbox.

The dual share structure is a holdover from the company's 2004 spin-off from Viacom Inc VIAb.N.

Shares of Blockbuster closed at 74 cents on Friday on the New York Stock Exchange. (Reporting by Laura Isensee; Editing Bernard Orr)