OK, I admit it. I root for Blockbuster (NYSE:BBI).

I know, I know. The stores can make for a lousy consumer experience, but there's a certain sense of nostalgia I feel when I visit a Blockbuster. And I root for it in much the same way that I root for rotary phones, REO Speedwagon, and other remnants of a bygone era. (And I say all this as a satisfied Netflix (NASDAQ:NFLX) customer.) So can Blockbuster be saved? I recently asked PBS technology contributor Bob Cringely, Apple (NASDAQ:AAPL) employee No. 12 and author of Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition and Still Can't Get a Date.

Can Apple save Blockbuster?
MG: Let's talk Blockbuster. The stock, surprisingly, has gained some ground recently, but obviously the company continues to struggle in its competition with Netflix. Earlier in the year, I was noticing that you wrote an essay titled "Don't Be Surprised If Apple Saves the Day for Blockbuster." What do you mean by that?

BC: Well, at the time when I was thinking about it, and I'm not saying that this isn't going to happen now, was that what Blockbuster has that Netflix doesn't have are locations. They're a real estate play. And so Blockbuster has an awful lot of locations, and having that local proximity has some value if you have a delivery mechanism that makes sense from a technical and market sense. The DVD is ceasing to be that. We're moving toward HD displays and televisions, and DVD doesn't do it for that. You can decide whether you're going to go with Blu-ray or HD-DVD, and then if you're like me and you have three little kids, you're going to have to ask, What's the peanut butter effect of playing with those disks?

I'm telling you right now -- the peanut butter effect is disastrous, so they're going to need an all-digital, no-peanut butter distribution mechanism. What I long thought it was & you go into the store, you plug your iPod or your phone or something into something, and you very quickly download a movie and then you go home. That's how Apple could gain from the location advantages of Blockbuster and how Blockbuster could gain from finally having a way of distributing something that cuts their inventory costs. It's Netflix with a local location.

To its credit, Blockbuster's through-the-mail service that competes with Netflix is in many ways better than Netflix, but the market doesn't see that, and so they're screwed. They really have to, in the long run, figure out a new game, and we haven't seen it yet.

Blockbuster vs. Netflix
MG: What do you make of this recent Blockbuster promotion where they give you a free DVD (rental) if you could show them that you're a member of Netflix?

BC: In the magazine business, they figured out decades ago what the value of a subscriber is and what it's worth to spend to gain a new subscriber. And every magazine in America -- every newspaper -- knows what that cost is. And they're willing to pay far more than you would guess. And so this is what Blockbuster is willing to pay. Is it going to work in the long run? No, I think it's intended to slow down their decline.

MG: And speaking a bit more about Netflix, to what extent do you think that video on demand is a real threat to Netflix?

BC: Video on demand is an alternative to Netflix if you're willing to select from a hundred movies. Now, the whole Blockbuster theory was that most people only care about a hundred movies, and that could well be true, but the Netflix user is a subset of the total video-viewing population, and frankly, they may be a little bit different in that they prefer to select from 60,000 rather than a few thousand. And so I would say that Netflix has a core group of users, their original users, and the majority of their users who quite frankly aren't going to be swayed by that. And there's the other question, which is, Does the local cable system have the bandwidth to embrace the greater number of potential movies that they would need to show in order to have that work? And the answer at present is no.

Other interesting musings:

You've heard Bob Cringely's thoughts on Blockbuster. What would you do to bolster Blockbuster in its competition with Netflix? Share your thoughts on Blockbuster, Netflix, and other stocks at CAPS, The Motley Fool's new stock-rating service.

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Mac Greer does not own any shares of Netflix or Blockbuster. He went to see Rocky Balboa on Christmas day and thought that the movie worked --- but not necessarily on several levels. The Motley Fool has a disclosure policy.