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Sears, Kmart Bow Movie Download Service

28 Dec, 2010 By: Erik Gruenwedel

The “Blue Shirts” have entered the transactional video-on-demand business.

Sears Holdings Inc. Dec. 28 formally launched a movie download service that allows consumers (including subsidiary Kmart) to buy and rent new release movies and television shows.

Called Alphaline Entertainment (http://alphaline.roxionow.com), the previously announced service is offering new releases such as The American (with George Clooney), The Town, Devil, Easy A and Legends of the Guardians, among others, for $3.99 for up to two-day rental periods.

Movies can be purchased for $19.99 and played on up to five different PCs. A title can be transferred to no more than four RoxioNow-approved portable devices.

The service, which is powered by Sonic Solutions’ RoxioNow technology, also offers episodic purchases ($1.99) only of TV series like “Mad Men,” “Sanctuary,” “Chuck,” “Fringe,” “Running Wilde,” “Hellcats,” “Chase,” “Fringe,” “The Closer” and “Two and a Half Men,” among others.

Alphaline will be rolled out in phases at Sears and Kmart stores nationwide with the assistance of the Sears Blue Appliance Crew, the retailer’s answer to Best Buy’s Geek Squad.

“Collaborating with Sonic provides a great opportunity for Sears and Kmart to launch digital services for customers seeking even faster access to the latest in home entertainment experiences,” said Karen Austin, president of consumer electronics for Sears and Kmart.

“We’ll continue to increase the reach and flexibility of the Alphaline Entertainment service by providing consumers on-demand access to the latest entertainment from a range of home and mobile electronics,” she added.

Novato, Calif.-based Sonic, which is set to be acquired by Rovi Corp., provides backend support for digital entertainment distribution services offered by third-party retailers such as Blockbuster, Amazon VOD and Best Buy. Walmart offers content downloads via its proprietary Vudu service.

Studios and media companies have made no secret their desire to monetize content at higher margins (than traditional disc rental) via transactional VOD at the retail, cable and satellite platforms.

Sonic and Sears are also working to embed Alphaline at a chip level on a growing network of devices, including portable media players, Blu-ray Disc players, mobile phones and high-definition television sets from leading manufacturers.

Analyst Richard Greenfield with BTIG Research in New York, said the addition of national retailers, such as Sears and Kmart, to the VOD space underscores the studios’ continued transition from physical to digital media.

Greenfield wonders what consumer would consider buying a digital movie for $20, which is the equivalent of renting it five times.

“With rental now so convenient between Netflix, Redbox and VOD, we believe consumers will simply stop buying movies, especially when it comes to digital content,” Greenfield wrote in a post.

Indeed, the analyst said increased proliferation of digital distribution will undermine Blu-ray Disc, which remains the lone growth vehicle in physical media. Greenfield cited availability of combo disc (Blu-ray/DVD/digital copy) new release The Town on Amazon for $18.99, which is $1 less than Alphaline. He suspects the quality of the 1.5GB digital copy file is inferior to transactional VOD, which could ultimately backfire among consumers.

“With a poor consumer experience in digital, we suspect most consumers will gravitate toward lower-priced rental options,” Greenfield wrote. “In turn, as digital adoption accelerates, overall movie industry profitability will fall.”

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