Company Town

The business behind the show

« Previous Post | Company Town Home | Next Post »

Blockbuster partners with Sonic, chases Netflix

January 13, 2009 |  8:30 pm


Movie rental giant Blockbuster has partnered with a Bay Area technology company to help it set up digital storefronts on an array of consumer electronics products.

The agreement with Sonic Solutions, a company that has created software to bring movie downloads and rental services to devices, provides Blockbuster with the technical know-how it needs as it seeks to extend its business to portable media players, set-top boxes and Internet-connected TVs.

"What we're realizing, more and more, is our consumers are trying to watch movies in a variety of different locations," said Kevin Lewis, Blockbuster's senior vice president of digital entertainment. "Our job is to be ubiquitous."

The combination better positions Blockbuster to compete with its fleet-footed rival, Netflix. The movies-by-mail company has lined up a series of high-profile partnerships to bring its subscription service out of the hands of postal carriers and directly onto the TV.

In recent months, Netflix has announced deals that would allow subscribers to watch thousands of movies and TV shows streamed over the Internet into their living rooms, using a TiVo Series 3 digital video recorder, an Xbox 360 video game console or the just-announced Internet-connected televisions from Korean manufacturer LG Electronics.

Other technology companies are also eying the TV.  Retailer lets customers buy videos online and download them to their TiVo boxes.  And digital media behemoth Apple Inc. delivers a similar experience, pairing its iTunes store with the AppleTV set-top box.

Forrester Research analyst James McQuivey said the Sonic partnership is another sign that Blockbuster is "really serious" about being part of the digital movie revolution. But it's also an acknowledgment of the retailer's limitations.

"It enables Blockbuster to say, 'Whatever device people want to watch video on, we'll put the Blockbuster experience on that device — without having to launch an army of developers,' " McQuivey said.

Blockbuster pursued a similar strategy in 2007, when it acquired Movielink — an online movie rental business started by five Hollywood studios — to move it quickly into digital distribution. But as consumers shied away from time-consuming paid movie downloads in favor of services that offered the immediate gratification of streaming to Internet-connected devices, Blockbuster began seeking another company with which it could partner for this type of expertise.

Sonic has existing deals to offer its own movie-rental service, CinemaNow, to consumers who buy Dell and Hewlett-Packard computers or use an LG BD300 Blu-ray player that can be connected to the Internet (a feature known as BD Live).  The company is also working with the manufacturers of portable devices with a screen and the processing power to handle movies — including Research In Motion, maker of the BlackBerry.

Blockbuster will have the benefit of Sonic's many relationships with gadget-makers. CinemaNow, meanwhile, plans to re-brand its movie offerings as Blockbuster stores.

"That's the key to stimulate the market: marrying a trusted brand with a platform that takes the guess work away from the consumer," said Mark Ely, Sonic Solutions' executive vice president of strategy.

— Dawn C. Chmielewski