As part of an effort to fix an ailing business, Blockbuster scaled back their big spending marketing campaign to compete with Netflix mail order DVD rental service. The first order of business for Blockbuster CEO Jim Keyes was to fix the stores. Now rumors suggest Blockbuster is gearing up to fight Netflix again only this time the battlefront is different. In the new frontier, instead of targeting mail-order, Blockbuster is reportedly aiming for the digital landscape.
According to a story reported by the Hollywood Reporter, Blockbuster is hard at work on some form of hardware based media hub. The device, which is neither named nor confirmed, aims to bundle content acquired with the purchase of Movielink (which was acquired for pennies on the dollar) along with a third-party developed set top box. The grapevine claims a formal announcement about the Internet streaming video service could come sometime this month.
Blockbuster’s spokespeople declined to either confirm or deny the story. They did, however, acknowledge that their intent is to offer a wider array of movie distribution services than the current slate.
“We’re talking to numerous companies and vendors about products, services, alliances and initiatives that can help us achieve our mission to transform Blockbuster into a company that provides access to media content across multiple channels,” a spokeswoman said. The channels, she further elaborated include “stores, by mail, through kiosks, through downloading [and] through portable content-enabled devices.”
Earlier this year at the Reuters Media Summit, CEO Jim Keyes stood up before a crowded room and displayed a feature length movie on his Blackberry. He went on to note that the demonstration was more than a presentation gimmick. Despite the oddity and questionable value of serving feature length content to a cell phone’s tiny screen and limited battery life, he confirmed Blockbuster was "talking with virtually all of the major [mobile] manufacturers" about making Movielink movies conveniently accessible across mobile phones.
That mobile service is the “portable content-enabled devices” channel Blockbuster’s spokeswomen mentioned. Kiosks have also been announced previously. If the download service turns out to be more than just a rumor, it will represent the one channel so far undisclosed: downloading. It will also represent a far more logical application of the Movielink assets.
[Blockbuster bought the PC based download service, Movielink, from its film studio backers in August 2007. They were rumored to have paid anywhere from $20 to $50million. The actual price, confirmed a week later by SEC filings was $6.6m; pennies on the dollar to actual investment].
If an Internet to TV download service turns out to be in the works, it will pit Blockbuster in another head to head battle with Netflix. (In January, Netflix announced a plan to take their online streaming service to the Television set through a hardware partnership with LG).
Other companies are also in the fight. The list of aspiringPC/TV convergence contenders includes a wide range of companies aiming to bridge the gap and offer film and video content to rent, or own through some TV to Internet connection. Members of the group include Microsoft (via Xbox Live), set top services like Vudu and Building B, Apple TV (which began a rental service earlier this year) as well as a joint venture from Amazon and Tivo. Competition is likely to be intense (and expensive).
Between Blockbuster and Netflix, reports hint the two companies are exploring different approaches. Blockbuster’s proposed offer is likely to be a standalone hardware device. Like a similar offering for Vudu, consumers will have to buy the box to use the rest of the service. Reports say there is no intention to focus on embedding software. Netflix, in contrast, has expressed interest in licensing their software application to a wide range of hardware manufacturers. Their plan seems to be to make accessing Netflix on-demand as easy, and ubiquitous as possible. They will then likely share some portion of revenue with device makers.
Despite showing some hint of financial improvement in March earnings, shares of Blockbuster remain in the cellar. The company’s shares closed Thursday at $3.25, not much better than an all time low of $2.66 hit earlier this year.
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