Blockbuster Reportedly Eying Pay TV

29 Apr, 2008 By: Erik Gruenwedel

Blockbuster is reportedly considering investing in the recently announced premium movie channel set to launch in 2009 as part of a joint venture by Viacom (parent of Paramount Pictures), Metro-Goldwyn-Mayer Studios and Lionsgate.

The Dallas-based No. 1 DVD rental chain, which was once owned by Viacom, would retain non-exclusive digital rights to the content, according to The Wall Street Journal.

The video-on-demand platform is slated to compete against pay-per-view movies from Showtime, HBO and Starz.

Blockbuster spokesperson Karen Raskopf would neither deny nor affirm the report. She said the company was exploring many options as it continued to transition from a pure rental play into an entertainment convenience store.

Blockbuster, which is in the process of attempting to acquire electronics retailer Circuit City Stores, is ramping up availability of Blu-ray and video game hardware and related software throughout its corporate-owned stores.

It also owns download service Movielink, which will be incorporated into Blockbuster Online.

“So, it's not surprising there are rumors out there,” Raskopf said.

Arvind Bhatia, analyst with Sterne Agee Group in Dallas, said Blockbuster's investment in Viacom's pay-TV project would make sense and likely not be more expensive than its $6.6 million acquisition of Movielink.

“It gains them experience in that market,” Bhatia said. “The investment is pretty low. By getting the digital rights to download movies they can become the go-to site.”

The analyst said Blockbuster CEO Jim Keyes wants to be everywhere, which includes downloads, sellthrough, video games, electronics, concessions and beverages.

“He is certainly trying to see what makes sense for his company and customers,” Bhatia said. “He wants to be where the market is going.”

Bhatia said he wouldn't be surprised if Netflix invested in the project as well. He said the online rental pioneer has been spending heavily on movie streaming and has stated a desire to incorporate the service and its brand in third-party set-top boxes.

“The idea is to be ahead of the curve,” Bhatia said.

A Netflix spokesperson was not immediately available for comment.