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Sears Eyes Movie Downloads

22 Jun, 2010 By: Erik Gruenwedel

Sears Holdings, parent company of Sears and Kmart, and Sonic Solutions June 22 said they have entered into an agreement to facilitate distribution of movies from the Internet via myriad devices, including televisions, Blu-ray Disc players and mobile phones.

Sears said it will incorporate and promote nationwide Sonic’s RoxioNow download technology in a variety of other digital services later this year. The platform enables retailers and consumer electronics companies to engage in the rapidly evolving entertainment supply chain through diversified product offerings, and better inform customers about digital distribution.

Digital movie revenue, including downloads and online rentals, reached $617 million in the first quarter this year, up 27% from the same period last year, according to DEG: The Digital Entertainment Group.

Sears joins a growing number of national retail chains, including Best Buy, Blockbuster and Walmart, that are ramping up efforts to not only sell electronic devices capable of accessing entertainment from the Web, but initiate proprietary services as well.

Indeed, Best Buy has launched its CinemaNow movie download service (brand name purchased from Sonic), Blockbuster On Demand offers transactional video-on-demand (VOD) and Walmart recently acquired Vudu.

“With direct access to so many movies and TV shows from a broad range of devices, our customers will have the ability to obtain the latest high-quality entertainment virtually anywhere, anytime,” said Karen Austin, president of home electronics for Sears Holdings, in a statement.

Sonic will generate three revenue streams from Sears, including a fee for each CE device sold with the RoxioNow platform installed; a fee for each digital rental or purchase through the platform; and service fees for maintaining and upgrading the RoxioNow platform, according to Eric Wold, media analyst with Merriman Curhan Ford in New York.

Wold said the deal underscores ongoing studio support for higher margin (compared with DVD rental) digital distribution at the retail level.

"This agreement with Sears would not have been possible if studios had any concerns," Wold wrote in a note. 

That said, the analyst believes growth for electronic devices capable of downloading movies will be slow, increasing from 3.5 million devices sold this month to 30 million devices in June 2011. More importantly, movie downloads will average about 1.2 traqnsactions per device per year.

"Depending on how many movies are downloaded by a household each month/quarter/year, there could be significant upside to our estimates for [2011] and, more likely, [2012]," he wrote.

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