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Blockbuster Buys Movielink

8 Aug, 2007 By: Erik Gruenwedel

Saying it wanted to enter the download business this year, Blockbuster Inc. Aug. 8 said it has acquired electronic sellthrough pioneer Movielink, a joint venture of MGM, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros.

Movielink, which has video-on-demand (VOD) rights with the studios, also offers content from Walt Disney Pictures, 20th Century Fox and 30 independent suppliers.

Terms of the deal were not disclosed, but in February The Wall Street Journal reported that Dallas-based Blockbuster was prepared to pay less than $50 million in cash and stock for Movielink as a conduit into the digital delivery market.

Blockbuster plans to continue to operate the Movielink service and to eventually make elements of the service available through Blockbuster Online.

The latter would appear to be in direct competition with the movie streaming service offered by online DVD rental pioneer Netflix.

It is uncertain whether Jim Ramo, CEO of Movielink since its inception, will remain in the position. He said the Blockbuster name should help jumpstart electronic streaming and sellthrough.

“That's good news for consumers and content providers alike,” Ramo said.

Blockbuster CEO Jim Keyes said the acquisition enables the rental company to offer consumers downloadable content via their PCs, portable devices, television-connected home networks and set-top boxes.

“Our acquisition of Movielink, with its associated digital content, is the next logical step in our planned transformation of Blockbuster,” Keyes said. “Now, in addition to the entertainment content we provide through our stores and buy mail, we have taken an important step toward being able to make movie downloading conveniently available.”

Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles, said the most notable aspect of the deal would be Blockbuster's improved footing with the studios.

Time Warner Inc., which owns Warner Home Entertainment Group, has made it clear it plans to offer content on VOD the same day as DVD sellthrough, in effect circumventing DVD rental.

Indeed, Time Warner executives in recent briefings have gone so far as to dismiss the rental business entirely. The Movielink purchase might help shore up that tenuous relationship for Blockbuster, said analysts.

“I think the studio relationship is the big news,” Pachter said.

He said the movie download business represents a minute percentage of the home entertainment industry, which he said is still enamored with packaged media.

“I don't see [electronic sellthrough] meaningfully growing for several years,” Pachter said.

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