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Blockbuster Expands Its Digital Realm

By Erik Gruenwedel | Posted: 14 Jan 2009

Blockbuster Inc. Jan. 14 said it created an alliance with Sonic Solutions aimed at distributing its movie, video games and TV content across multiple digital channels, including home and portable electronic devices.

The Dallas-based No. 1 DVD rental service is collaborating with Sonic, which includes the Roxio and CinemaNow brands, and and its digital media software applications for a variety of CE devices such as Web-enabled Blu-ray Disc players, digital video recorders (DVRs), set-top boxes, mobile phones and connected TVs.

High-definition TVs connected wirelessly to the Internet were a common theme at the recent Consumer Electronics Show in Las Vegas.

Additionally the two companies will make their digital libraries of studio content available under the Blockbuster brand for both video-on-demand (VOD) and electronic sell-through.

Sonic’s software development kit would compliment Blockbuster’s nascent entry into digital distribution via downloads and streaming on CE devices and PCs.

“Through this alliance with Sonic, we plan to become a ubiquitous presence in the digital world,” said Jim Keyes, Blockbuster chairman and CEO. “Our goal is to offer consumers the most digital content, the most accessibility, via the most devices, both in and out of the home.”

The move also marks a counter surge against rival Netflix’s burgeoning network of streaming partners, which include select LG and Samsung Blu-ray players, Microsoft’s Xbox 360 and TiVo, according to analysts.

“This largely remains a battle between Netflix and Blockbuster at the moment, and it is clear both parties are taking no prisoners,” said independent analyst Rob Enderle.

He said that regardless of who wins, the consumer is getting better entertainment delivery choices and increased content.

Phil Leigh, president of Inside Digital Media in Tampa, Fla., said Sonic is enabling Blockbuster to emulate Netflix’s digital strategies by getting its brand embedded into consumer appliances that will be entering the market in the next few years.

He said Sonic’s digital rights management also allows consumers to legally burn copyrighted content, which he said is a value-add to the alliance.

“Blockbuster feels compelled to compete on that front,” Leigh said.

Analysts said 2009 would mark an important transition year for TVs, with the advance of Internet-enabled units. Proliferation of HDMI inputs in PCs and TVs combined with wireless connectivity will see an increase of tech-savvy consumers watching movies and TV from Hulu.com and other online sources.

“This is certainly an important trend to watch,” Enderle said. “We are seeing the accelerated end of packaged media as digital distribution continues to ramp sharply into the market.”

Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, countered that demise of packaged media is largely overstated due to its commodity status and the ubiquitous presence of DVD players in U.S. homes.

“This is a salvo for digital distribution, but packaged media has a number of years left,” Woo said. “In a couple of years, this might not be the case, but thanks to slow adoption and the economy, transitions can take a while.”

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