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Best Buy launching digital movie service with CinemaNow

November 2, 2009 |  9:00 pm
BestBuy One of the nation’s biggest sellers of DVDs is making a leap into digital movie downloading.

Best Buy Inc. is partnering with online video provider CinemaNow to create a new a movie downloading service that will be integrated into most Internet-connected electronics -- including televisions, DVD players, computers and phones – sold at the store.

Facing an industry-wide decline in physical media, Best Buy has recently been making an aggressive push into digital. Last year it acquired online music service Napster for $121 million. The partnership with CinemaNow, which is expected to launch late this year or in early 2010, marks a companion move in online movies and comes as DVD sales are down about 13% so far this year.

“Digital is developing as a channel and we’re forecasting that by 2012 it will be a significant, double-digital percentage of the movie business,” said Ryan Pirozzi, director of digital media for Best Buy.

The two companies are collaborating on a new online movie service, yet to be named, that Best Buy will pre-load on electronics from retailers including Samsung, Sony, Panasonic and Toshiba. CinemaNow is handling all of the back-end technology, as it does for Blockbuster Inc.’s similar service, while the retailer will handle everything seen by consumers, including design and pricing.

The two companies initially announced a partnership earlier this year whereby CinemaNow downloads have been available on Best Buy’s website and some of the store’s devices. But the new partnership, which lasts at least three years, signals a major step forward for the retail giant as it prepares to launch its own digital movie brand.

Best Buy will be paying CinemaNow, which is owned by Sonic Solutions, a fee along with a percentage of the service’s revenue for its work behind the scenes.

Legal movie downloads have been available in some form for about a decade. However the business has been impeded by limitations on availability, consumers’ ability to play video on different devices, and high pricing that have made DVDs and illegal downloads more attractive.

The market has recently become very competitive, however, as online movie services from Amazon.com and Netflix are competing against Apple’s iTunes Store.

Pirozzi said making online movie distribution simpler for consumers will be a top priority. The company plans to experiment with numerous business models including purchase, rentals, subscriptions and advertiser support. It will also emphasize the ability to watch movies on televisions as well as computers and mobile devices.

“This is certainly a very crowded space, and we’re going to work to translate our customer insights into a more compelling service than those out there currently,” he said.

Best Buy’s biggest advantage is its stores. The new movie downloading service will be marketed at retail locations, and employees will be trained to explain and promote it to customers.

--Ben Fritz

Photo: A Best Buy store in Culver City. Credit: Lawrence K. Ho / Los Angeles Times.

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