Blockbuster to expand digitally with CinemaNow

Rental giant able to deliver movies through some of the same devices as Netflix

By Jennifer Netherby -- Video Business, 1/14/2009

JAN. 14 | Blockbuster is joining with online movie service CinemaNow in a deal to deliver movies to Blu-ray Disc players, Internet-connected TVs, mobile phones and even the iPhone, the two companies will announce Wednesday.

The multi-year preferred provider agreement between Blockbuster and Sonic Solutions, which acquired CinemaNow late last year, will put the rental giant on some of the same devices through which its main online rival, Netflix, has already begun streaming its own digital content.

The joint service, to be called Blockbuster Powered by CinemaNow, is expected to debut on a variety of devices in the second half of the year. Those initial devices are expected to include the LG Blu-ray player and Internet-connected TVs with the Yahoo!/Intel widget.

Eventually, Blockbuster and CinemaNow hope to have a full ecosystem so a Blockbuster customer could download a movie to their Blu-ray player, transfer it to their PC and burn it to a DVD through a Sonic Qflix DVD burner or watch it on a mobile phone or other device, all under the Blockbuster banner.

“What this partnership is about is providing a branded entertainment option to get consumers their content into the boxes that surround them without having to get them to organize it themselves,” Blockbuster senior VP of digital entertainment Kevin Lewis said.

Blockbuster already offers movie downloads through its 2007 acquisition of movie download service Movielink, which has been absorbed into Blockbuster.com. Going forward, it will discontinue using Movielink technology in favor of CinemaNow’s in the areas where the two overlap. Blockbuster will continue to operate the online storefront and maintain its digital content deals with studios and suppliers.

“At its core, I think this deal allows both of us to focus on what we do best,” Lewis said.

Sonic and the CinemaNow team will focus on the technology and the backend of the service.

The deal is non-exclusive, but Sonic will now primarily push the Blockbuster Powered by CinemaNow brand as it reaches out to consumer electronics companies and retailers for partnerships for CinemaNow, Sonic executive VP of strategy Mark Ely said.

Sonic also might adopt the new brand for some of the devices CinemaNow is already available on, if device partners agree to the change. CinemaNow offers movie downloads through Xbox 360 game consoles, Archos portable media players and has a deal with TiVo for Disney movies, among other consumer electronics companies.

“The CinemaNow brand will continue for some time,” Ely said. “The idea is to introduce our partners to the Blockbuster brand.”

Sonic also plans to offer Blockbuster movies on the Apple platform, streaming movies from Mac computers to iPhones and iPod Touch players. Lewis said that was part of the reason Blockbuster chose to partner with CinemaNow.

Blockbuster is looking at ways to combine the new download offerings with its existing Blockbuster DVD-by-mail subscription service, but rights issues will make it difficult, Lewis said. The retailer offers digital movies as permanent downloads or as video-on-demand rentals but doesn’t have licensing rights to offer those films on a subscription basis. Premium TV channels Starz, HBO and others have exclusive licensing deals with the major studios to offer video-on-demand movies on a subscription basis for the first decade or so after a film’s release, severely limiting which movies can be offered by digital subscription.

“Our customers want first-run movies,” Lewis said. “It gets tricky in the subscription world. We’re looking at different subscription models, different things to try to interconnect our offerings as much as possible.”

Netflix offers its digital service to subscribers for free as part of their DVD subscription plan. Because of that, it doesn’t have rights to stream many new release films, though it has partly gotten around the issue by signing a deal with Starz to stream newer films for which the movie channel has the rights.

Blockbuster’s service is likely to land on some of the same devices that Netflix and Amazon Video On Demand are already on. Netflix offers its service on Xbox 360 consoles, TiVo HD boxes, LG Blu-ray players, TVs and the Roku player. Amazon is on TiVos, Blu-ray players, TVs and the Roku player.

Sonic and Blockbuster are betting on the Blockbuster brand to set them apart.

“The brand matters a lot in a very fragmented brand movie space. More consumers will look to us as a navigator, as a trusted partner in making sure all of this works,” Lewis said.