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Blockbuster, Warner Sign New Distribution Agreement

23 Mar, 2010 By: Erik Gruenwedel

Fiscally challenged Blockbuster March 23 received support from Warner Home Video after the studio inked a new distribution deal providing new release availability in stores, by-mail and digital.

As a result Dallas-based Blockbuster has Warner’s critical and commercial hit The Blind Side (and Sherlock Holmes on March 30) in stores, download and by-mail nearly a month before Netflix.

Warner, in an effort to establish a retail window for new release DVD and Blu-ray Disc movies, recently inked separate deals that call for 28-day shipment delays to Netflix and Redbox, the latter the largest operator of $1-per-day rental kiosks.

The Warner titles will also be available in Blockbuster Express kiosks, which Duluth, Ga.-based NCR Corp. is rolling out through a separate license agreement with Blockbuster.

NCR does not acquire content through Blockbuster with exception of select catalog titles. All new-release Warner titles stocked in Express kiosks are acquired via third-party retail sources, according to a company spokesperson.

Warner has been able to orchestrate the disparate deals by virtue of being the market leader in total video (DVD and Blu-ray combined), theatrical catalog video, TV on DVD and Blu-ray titles sold.

For Blockbuster, which has been fending criticism that it represents an archaic brand in the age of digital, the new agreement makes the company the only multichannel provider to stock all major studio releases on the day of release.

“This gives Blockbuster a full four-week lead before either kiosk or other subscription services can offer any Warner Bros. titles,” said Blockbuster CEO Jim Keyes.

It also reportedly provides better financing and title copy depth, both key elements as Blockbuster attempts to restructure costs and not file for bankruptcy.

The chain warned last week that if it could not restructure distribution deals with studios if it would have difficulty maintaining operations.

Ron Sanders, president of WHV, said the new agreement underscores a “cooperative and successful relationship” between the two companies that has endured for more than 25 years.

Eric Wold, analyst with Merriman Curhan Ford & Co., in New York, said the revised deal gives Blockbuster a slight advantage over Netflix and Redbox, which dominate the by-mail and kiosk distribution channels.

“While we see this announcement as an improvement to Blockbuster’s positioning, we believe it may be too late to make any dramatic changes to consumers’ core preferences … although they could potentially benefit from consumers utilizing Blockbuster as a supplemental service if absolutely necessary before the 28 days are up,” Wold wrote in a note.

The analyst, who covers Netflix and Redbox, said Warner titles represent just 5% of Netflix DVD shipments and would not likely cause a migration by Netflix subscribers to Blockbuster by-mail.

“Should numerous other studios follow their lead, then maybe this would become an issue to consider,” Wold wrote.

He added that Redbox continues to negotiate with Universal Studios Home Entertainment and 20th Century Fox Home Entertainment regarding separate distribution agreements similar to the Warner deal. Such agreements would bring to an end ongoing litigation between Redbox and Universal and Fox.

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