Movielink on B'buster's screen
Acquires downloadable library; inches closer to NetflixBlockbuster said Monday that it has paid an undisclosed amount to acquire Movielink, giving the nation's biggest DVD rental company instant rights to a vast library of downloadable feature films and TV shows.
Movielink was founded five years ago by NBC Universal, Paramount Pictures, Sony Pictures, Warner Bros. and MGM. It lets users rent movies for $1.99-$4.99 or purchase them for about $17.
The purchase price is being kept secret, but Movielink reportedly turned down a $70 million offer last year from Blockbuster. The companies renewed negotiations three months ago, though the price had dropped to less than $50 million, observers said.
Besides nonexclusive rights to content from its five movie studio founders, Movielink has struck deals with the Walt Disney Co., Miramax, Lionsgate and a few dozen others, allowing it to offer users one of the largest selections of downloadable titles.
Until now, Blockbuster's digital strategy has seemed nonexistent, though with its Movielink acquisition it becomes a competitor with iTunes, a Wal-Mart product, CinemaNow and — perhaps most importantly — it closes a gap with primary rival Netflix.
Netflix and Blockbuster have been battling it out on the DVD-by-mail front for several years. Netflix recently launched its downloadable service free to subscribers, and Blockbuster countered with Total Access, which allows its by-mail users to exchange DVDs in stores.
Netflix's downloadable service, like Movielink's, is for viewing on computers; likewise Apple's iTunes, though an Apple TV set-top box allows for TV viewing, as does networking a computer with a TV in the case of Movielink.
But a more elegant solution for viewing digital rentals on TV screens has been gaining traction lately, courtesy of a partnership between Amazon.com's Unbox digital movie rental service and TiVo.
Blockbuster CEO Jim Keyes acknowledged Monday that Movielink is basically for watching movies on computers and portable devices but that the ultimate goal includes an easy solution for viewing on TV screens as well.
"That's the next step in the equation, to move that content to your big screen," he said.
For that, he will consider "further investments in technology, potential strategic alliances and additional acquisitions," he said.
For now, Blockbuster intends on operating Movielink as is and eventually through Blockbuster.com.
While Movielink has 6,000 digital titles in its arsenal, it has rights for digital distribution to only 3,300, about the same as Netflix. Netflix and Blockbuster each offer their online customers more than 30,000 titles on DVD.
Blockbuster's only meaningful competition in the bricks-and-mortar movie-rental business, Movie Gallery, also entered the digital VOD space by purchasing MovieBeam in March.
MovieBeam was incubated at Disney with investments from Cisco Systems, Intel Corp. and venture capitalists. That service requires a set-top box for viewing movies on TV sets, and customers choose from a rotating list of 100 titles that may be rented for as little as $1.99 apiece.
Movielink will continue to operate with 75 employees in Santa Monica. Asked if the company eventually might move closer to Blockbuster's Texas headquarters or if Movielink jobs are in jeopardy, Keyes said, "It's too early to speculate."
Shares of Blockbuster, up 1.4% during regular trading Wednesday, surged as much 9% after hours when the company announced its purchase of Movielink.