You can't accuse Blockbuster (NYSE: BBI ) of sleeping through the digital revolution.
The leading DVD rental chain is taking a bolder step into online video, teaming up with Sonic Solutions (Nasdaq: SNIC ) to beef up its digitally delivered movie offerings.
Sonic's fledgling CinemaNow service will be rebranded with Blockbuster's name. It's a good move for both parties, but investors need to be realistic. Sonic acquired CinemaNow two months ago for a measly $3 million, after a laundry list of former stakeholders like Cisco Systems (Nasdaq: CSCO ) and film studio Lions Gate Films (NYSE: LGF ) failed to make it fly.
Blockbuster also took advantage of the digital-delivery fire sale when it snapped up CinemaNow rival Movielink two summers ago. Neither service has gained a whole lot of traction, which would naturally make a cynic curious why two laggards in digital delivery are better than one.
The new service has a chance, though. Apple (Nasdaq: AAPL ) , Amazon.com (Nasdaq: AMZN ) , and Netflix (Nasdaq: NFLX ) command most of the couch-potato headlines, with Amazon and Netflix in particular inking several deals with gadget makers to deliver their streams through TVs, Blu-ray decks, and other home-theater gadgets. Sonic's CinemaNow has many similar deals in place, but it lacks the spotlight that Blockbuster can deliver by marketing the multidimensional platform through its chain of stores. Blending both services' digital video libraries will also give the new product greater depth.
As it stands, the product will be a closer match to Amazon.com -- moving a la carte rentals and outright purchases -- than Netflix, which makes 12,000 of its more than 100,000 titles available at no additional cost to most subscribers. But Netflix may not be alone in that smorgasbord approach for long.
Blockbuster CEO Jim Keyes told the Associated Press yesterday that the company "hopes" to develop a subscription plan for unlimited access to its digital library. That would be a game-changer, even if it's unlikely to happen anytime soon.
Netflix can offer up thousands of titles without breaking the bank because the choices consist mostly of television shows, older catalog titles, and obscure indie films. Major studios are naturally reluctant to devalue their new releases that way. However, if Blockbuster is able to sway enough studio bigwigs to give it a shot -- and slap a price on the product that is reasonable to the consumer, while giving the content creators a fair bounty -- it could really turn heads, possibly making Amazon and Apple obsolete in this cutthroat yet nascent market.
The plot's just begun to thicken. Don't you dare leave before the credits roll.
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