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Best Buy (NYSE: BBY ) will finally toss its hat into the digital video ring when it launches its new streaming service next week.
The retailer was fashionably late last year, when it announced that it would acquire the CinemaNow service, partnering with former owner Sonic Solutions (Nasdaq: SNIC ) , whose technology would power its platform.
What seemed like a dumb idea then looks even dumber now.
Best Buy is hoping to rent digital flicks for $4, and sell permanent downloads for roughly $15 apiece. Those prices aren't all that different from what Blockbuster (NYSE: BBI ) and Amazon.com (Nasdaq: AMZN ) have been trying to do for several quarters -- and those companies haven't exactly set the digital realm on fire.
Bulls will argue that Best Buy has certain chain-specific advantages. It can promote the service within its stores, and bundle home theater systems with pre-paid rentals.
So how is Best Buy's scorecard on that front? The company teamed up with TiVo (Nasdaq: TIVO ) for a strategic alliance last summer, yet the DVR pioneer continues to shed subscribers. Best Buy acquired Napster two years ago, yet Best Buy is still an afterthought in digital music.
Sure, Best Buy sells a ton of DVD and Blu-ray discs. Now, it can tack on digital copies through CinemaNow, and all will be perfect … right?
Piecemeal rentals won't work in a climate where studios ensure that rental prices stay more or less the same across multiple platforms. Quite frankly, it's probably just a matter of time before studios laugh off these middlemen distributors and begin offering their films directly to consumers.
Either way, Best Buy's pay-by-the-movie approach won't work. The only company doing digital rentals right has 14 million subscribers, offering couch potatoes unlimited streaming of its growing digitally licensed catalog at no additional cost to its DVD rental service. Best Buy is late in crashing a party that never really had a chance to get started.