Should Netflix Worry About K-Mart's New Service?

Are you looking for Blue Light Specials on movie downloads? You're in luck, because K-Mart parent Sears Holdings (Nasdaq: SHLD  ) just launched an online video service.

Alphaline Entertainment is powered by the software and content library of Roxio maker Sonic Solutions (Nasdaq: SNIC  ) , and it's a cookie-cutter effort that's hard to tell apart from fellow Roxio-fueled rental site CinemaNow.

The main difference seems to lie in pricing points -- Inception is available for a 24-hour rental from both sites for $3.99, but Alphaline would also sell it to you for $19.95 while Best Buy (NYSE: BBY  ) only wants $15.95 for the CinemaNow version. Of course, this looks like a time-limited sale as CinemaNow boasts of "New Everyday Low Price on New Releases!" There is little else that sets the services apart from each other, but then again, Best Buy and Sears often sell the exact same goods anyhow. This is nothing new in the retail world.

Some might call the launch an attack on Netflix (Nasdaq: NFLX  ) , because it's all about long-form movies in digital format. But it's a pay-to-play service that bears very little resemblance to the subscription model that Netflix espouses, and it's also focused on new releases, which is a territory Netflix has yielded to retailers and Blockbuster. In fact, Sonic's Roxio software also backs Blockbuster's On Demand service (formerly known as Total Access). Though Blockbuster put a lot more effort into making its service look and feel different, I don't see anybody calling Blockbuster On Demand a serious challenger to the Netflix hegemony.

Sonic, which is in the process of being acquired by information collector and advertising operator Rovi (Nasdaq: ROVI  ) , first announced the Sears partnership six months ago, so this should not change the deal-making process at all.

For Sears, it's a simple money grab with off-the-shelf services and minimal branding effort involved. Sonic sticks another brand-name feather in its hat, perhaps attracting new bidders with pockets deeper than Rovio's. And Netflix yawns, then checks if anybody else has a serious challenger to its long-tail subscription market in the wings. Nope, not today.

Add Sonic Solutions to your Foolish watchlist to keep an eye on the potential bidding war, or add Netflix instead to get a better read on the digital media market.

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. Best Buy is a Motley Fool Inside Value selection. Best Buy and Netflix are Motley Fool Stock Advisor picks. Motley Fool Options has recommended buying calls on Best Buy. The Fool owns shares of Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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