Blockbuster announced the acquisition of movie download site Movielink this evening. The price is not being disclosed (meaning it isn’t “material” to Blockbuster’s shareholders), although the Wall Street Journal says it was less than $20 million.
Movielink was created in 2002 as a joint venture of most of the big studios - Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. Studios. $100 million or so was spent building the company.
That’s $80 million in losses for the studio investors on their Movielink project, which is money that could have been invested in higher ROI investments. Like suing their customers.
This is clearly a hedge move by Blockbuster, which is locked in a death spiral with the cheaper and more convenient Netflix. Netflix also launched an awesome free movie on demand product earlier this year (and are using much of their operating profits to fund it). Until now, Blockbuster had no answer.
But Movielink certainly isn’t going to be a silver bullet for Blockbuster. We looked at all of the players in Movielink’s space last October. Their competitors include, besides Netflix, Amazon, iTunes, CinemaNow and Guba (and, let’s be honest, BitTorrent). Movielink has a very deep library of movies, but they are DRM’d to the hilt and the studios force them to price downloads at higher-than-dvd prices.
Blockbuster’s salad days ended in 2002, and the stock has slid steadily since then. It is no longer profitable. There are just too many options for consumers who want to watch movies at home. The company’s biggest asset, and biggest problem, are the long term leases it has on its 9,000 retail stores. It needs to defocus on Netflix and think about how to use those stores to its advantage. Otherwise, its long term prognosis is clear - deadpool.
See all
Post
I can just imagine the board meetings these guys must have.
I think the best they can do is to sell to a private equity firm just to get out of the publicly-traded radar, take some loses and restructure. They still have a bit of brand left, and surely they can find a way to leverage the brick and mortar stores they have. Perhaps amazon can by them and use them as some of distribution center and leverage the brand to get into movie rental. Who knows…but it would be interesting to watch.
They might as well just close the movie rental business and transform their stores into coffee shops. People no longer walk/drive to rent movies anymore, even for a buck, but they sure spend $5 for an ice tall mocca low-fat latte frappiado with cream on top (which if you ask me, it’s just as insane)
That’s just a lame effort to keep their head above water. If they were serious about moving into that field, they would hav looked for a bigger venture by buying a larger rival. It seems poorly researched to me.
As for their stores…well with DVD prices coming down considerably, people can afford to just buy a new copy online / supermarket. Why rent?
The key point here is the very deep library of movies. Are there movies available that could not be found elsewhere?
And being DRM’d may not be a problem with institutions that may be downloading moves and want to stay as ethical as possible in their business transactions. Even the ‘higher than DVD prices’ may not be a problem if there is a difference in quality or other factors that may compensate.
SEW - what is up with those stars and dots and stuff? Does that help click thru on the link? Please stop.
DRM is a very big problem. Macs, for example, cannot access the movies. And yeah, they have a deep library of movies…because the company was owned by the studios. But the prices are ridiculously high. Those agreements need to be renegotiated, and there is no indication that the studios want to renegotiate.
ROFL:
no they are not about getting click thrus, there are other positive, complex and advanced reasons - STARE AT THEM VERY CLOSELY …. those answers WILL come to you
Be ready for the very positive, subliminal effect it will eventually have on you ….
Online movies viewing has a major bottleneck - bandwidth. with increasing load on servers across the world for different sites, cost of bandwidth will rise substantially which makes me rethink on online movies.
They would have probably made some sort of income if they had opened their website to the human beings living outside the U.S.
It’s sad to see that a consumer who is willing to pay money to watch something being “blocked” from even accessing a website, because he lives in a different country, when most of the hack stuff goes on in the U.S itself. That stuff is just ridiculous.
*I was talking about MovieLink.com being blocked outside the U.S.
wait a minute- I thought that after blockbuster found a way to leverage its stores that it had become the cheaper and more convenient one?
I certainly found that to be true, and I switched from netflix to blockbuster.
For their cheapest ($6/month) program, I get 5 movies/month including the mailer tradeins and coupon. I can go down the block to get a movie instead of waiting for netflix in the mail… did something change about that?
Michael, it seems your posts are becoming more and more about opinion and less and less about facts. Not that i am not interested in your opinion… i am, but, please, lets try to be a little less biased!
Your email does put blockbuster in a very bad light… so its not surprising at all that most (all so far) of the comments can’t see anything good about it.
Do you “know” the reasons blockbuster has bought movielink? Do you “know” if they have a plan for their 9000 bricks and mortar store?
Perhaps they are not “dumb” - and this step somehow does fit into a larger picture? I don’t know the answers to those questions… but my point is, if you don’t, then you should try to indicate that what you have written better as your opinion… (aka, “in my view …”) and clarify and list what you don’t know (aka, anything about their board, thier master plan, their intentions)… did you actually speak to anyone from blockbuster reagarding this? If you did, perhaps your opinions are backed by more facts than i realise… but the post does not make that clear.
I find it lame. Dont think it’ll work….let’s see…..
Mike - you note that Netfix is more convenient than Blockbuster. Why do you believe this?
I find that both services are basically identical in terms of getting the movies - 1 day.
Blockbuster has store returns for a free movie - Netflix has some movies on demand on your pc.
Blockbuster has more copies of new releases, Netflix has a somewhat larger library.
Otherwise, they seem the same.
Michael, I must admit that I agree with “mage ringlerun”. I grow continually weary of your opinion in each of your blog posts. You continually make snap judgments and condemn companies to the “deadpool”, sometimes before they even start a BETA release. Please, less speculation and more facts.
I find Blockbuster Online’s store return policy quite convenient. Just because you may have a super-high bandwidth connection to download whole movies in a few seconds and find that more convenient doesn’t mean everyone else does. The posts here are becoming less and less objective all the time, and I keep thinking more and more about removing your feed. Shame on you.
I agree with a couple other posters - I think you have it backwards. For the *same* price, I get the same package as Netflix — except — I can go down to the local Blockbuster and swap my movie for a FREE movie rental. I can do this as many times as I want.
Even though I’m on the cheapest plan, I can easily watch 5-6 movies a month (which is more than enough for me). And Allen is right about the selection.
Also, BB new upgraded site is great - some nice 2.0 features and it works well. I’ve been very happy with my BB service and wouldn’t think of changing to Netflix.
Also the whole movie download thing - who really wants to watch a movie on their computer? I’m not on a darn plane. I’m in my house. The whole concept of downloading movies and watching them at home is the biggest, most overblown concept on the internet tubage today.
Think about it, how many people have a nice enough monitor (read large enough) setup in a *comfortable* location where you can watch a movie? Gonna sit in that desk chair for two hours and stare at the screen? I bet less than 1% of all internet surfers would do this - and they are hardcore users. it doesn’t appeal to the masses like me - and I’m a very techy type of guy.
I want to watch a movie on my *TV* on my *COUCH* - not in a chair on my pc.
BB rocks IMO, and downloading movies to watch is for the birds for the foreseeable future. Figure out a way to get that downloaded movie TO MY TV and you have something. That’s what my cable company does already (and does for FREE in many cases) .
Cheers
Allen - I’m comparing netflix to blockbusters core business of renting dvds from stores, since that is where all their revenue comes from. I agree that their dvd rental business is superior, i even wrote about it:
http://www.techcrunch.com/2006.....h-netflix/
Czaries: objective? dude, you are clearly not here for the right reasons. The whole point of this blog is to fire off my personal opinions. if you are looking for a blog that regurgitates dozens of press releases a day, this isn’t the place for you.
In fact, I’m afraid I’m going to have to go ahead and fire you as a reader. you are hereby banned from visiting techcrunch.
Tom - yeah, I don’t disagree, see my comment immediately above. What I’m talking about here is blockbuster’s core business of, you know, renting dvds from stores. They can’t just pretend that doesn’t exist. Lots and lots of liabilities and costs associated with all those leases, staff, etc.
@ Michael:
Okay, that’s fair. Blogs were designed for opinions, not necessarily objective news. But please stop it with the “OMG this company is SO deadpool because I say so!” crap. And please pay more attention to the startups! I thought that was the whole point of this blog to begin with?!
Yeah, I can see where their core business is expensive, but I think that also gives them an edge over Netflix. Well, it will be interesting to see what happens.!
I remember your posts last summer
- i think it was first i love netflix, then i love blockbuster 
I guess those stores serve a purpose - to get a free dvd for returning the online movie… my guess is that a percentage of customers buy other items including the sno caps.
I wonder if the dvd machines in the supermarkets and convenient stores are working - i see some have dvds for a buck a day.
I cancelled my Netflix after 3 years and over a 1000 movies viewed for two reasons: Netflix wouldn’t rent me current releases and I could rent these releases at Hollywood Video for a little more, plus the store is only 5 min away. Compared to Blockbuster, Hollywood has a better selection of non-kid movies. IMHO, BB missed the market several years ago–big business thinking vs small innovator.
Czaries - fair enough. I will never again say “OMG” or spout opinion without some sort of effort at supporting that opinion. And I will try to cover more worthy startups. Now, with regard to this post, do you really disagree with my thoughts?
Still friends?
heh. I haven’t gone to bed yet today so I’m in a bit of a mood.
Michael - I’ll hold you to that! I do agree that Blockbuster is in a bit of a pickle, and has been for some time - that’s no secret. Maybe the solution here is for blockbuster to transform all their stores into giant fully-automated $1-per-day rental machines with 6 different drive-up windows? “Insert DVD from Blockbuster Online to get a free rental credit or insert credit card”. Hah! Wouldn’t that be a sight to see!
And don’t worry, I’ll still read the blog. Must… have… tech… news…
Here’s a little food for thought. First, Blockbuster has been getting out of video rental for years. Their in-store focus is on selling DVDs and video games, both new and used. The leases on all those stores are a problem, but it should come as no surprise that Blockbuster has been rapidly closing stores for the past year and a half.
Blockbuster also has laptops set up in most of its stores to allow customers to access Blockbuster Total Access from the store. I think it would make sense to increase the number of laptops available in the stores and treat the online service as the primary focus of the company.
Also, as a Blockbuster employee, I think I am in a position to disagree with you, Michael, regarding the viewing habits of customers. We have had to work ourselves to death to educate customers on the benefits of online rentals. Most of our core customers feel like “Oh, it’s just around the corner, why do I need to wait for it in the mail.” It’s been an uphill march. Video rentals rise and fall on the availability of movies that people actually want to see. I remember the fall/winter of 2005 being especially bad because of that Spring/Summer’s big flops. Blockbuster lost one of its big sources of revenue when it eliminated late fees. That is still having an effect on the business.
Frankly, from the first moment I used Time Warner Cable’s OnDemand service to rent a movie, back in 2003, I’ve been hooked on OnDemand as a rental solution. I don’t understand why more haven’t embraced it.
Hey Earnest - I clicked through to your blog and linked it below. It’s interesting to get the point of view of a BB employee. Good stuff.
http://mellifluent.info/?p=12
Blockbuster is an example of what happens to a retailer when the company’s management doesn’t have the tenacity to say NO to its marketing vultures and tell them to f* off for minute and try to give their customers some RESPECT. Blockbuster must have considered their customers to be a bunch of weenies, with no understanding of how BADLY they were being ripped off when they got suckered into a movie rental costing 5 dollars (literally! here in AZ it’s FIVE dollars!) then got MUGGED FOR ANOTHER FIVE DOLLARS when their FIVE DOLLAR movie rental was returned ‘late’.
And of course the infamous “NO LATE FEES” scam was just the final straw that broke the camel’s back.
Blockbuster is finished. Every time I’ve been in their store, thrice in the past year, the place has been stone cold empty. Nobody can stand being in those stores. Any customer that does find themself in there (ostensibly because they don’t watch DVDs often enough to merit netflix) is treated to a wall full of confusing ‘display boxes’ then the world’s LONGEST damn check out. For crying out loud, where are the kiosks? Even the grocery store has check-out kiosks! Ugh!
Its surprising that they picked MovieLink. Given what is VUDU and Tivo (with Amazon UnBox) is bringing to the table, these guys must look at the long term strategy.
Both BlockBuster and Netflix must look into the set-top box space. Here is a post about that:
http://abhishek.tiwari.com/200.....and-enjoy/
I’ve said it before on other Blockbuster/Netflix postings, Redbox beats that for new flicks. There’s no subscription, just $1 per day, and you can get and dropoff movies at any Redbox kiosk.
We use a combination of On Demand and Netflix which works really well. The only annoying thing that I’ve found about Netflix is the occasional scratched DVD. We’re only casual TV watchers though so it really isn’t that big of a deal.
I haven’t gone into a Block Buster store in years. They treated us pretty poorly. Apparently I owed them over $70 for a $10 disc… right.
Blockbuster could do well with Movielink if they integrate it into Total Access. The combination of local stores and downloadable movies would be excellent.
I personally chose BlockBuster over NetFlix for the local returns. The “free” rental and extended return times (not “no late fees”, but way better than other brick and mortar company return/fee policies). I also have a much better change at actually getting new releases at the store than in the mail.
What if BB started offering USB Keys with movies?
- Bring it home and plug it into a Media/Vista/Home PC/Server or Mac Mini.
- Bring it back just like a DVD. “Reusable media saves the environment.” (BS, but a great marketing trick)
What if the put a server/storage at each location for their distributed network?
- A controlled BitTorrent-like network of their own. Better hosts, faster networks, and utilizes existing space/security/infrastructure.
- Geographic/population capacity could follow similar rules to their brick and mortar planning.
How about 1gb ethernet connections at the store?
- My laptop is typically in my car when I go by the store, so I could just bring it in and download a movie in about the same time as it normally takes to browse, select, and check out.
I actually disagree with the assessment. I think that Netflix is the one who should be concerned, not Blockbuster.
Blockbuster has a clear advantage as it has local distribution channels. It has already taken advantage of these stores to increase its online membership, which is taken out of Netflix’s customer base or would-be customers base. Movie renting has mostly been a commodity, and price is important. Right now, Blockbuster is cheaper.
Netflix responds to this by trying to differentiate and find a new distribution channel to make it more convenient and quicker to rent a movie, but it’s not a strategic advantage as Blockbuster can and will imitate this. In short, Blockbuster has a strategic advantage over Netflix and not the other way around.
Having said that, I do agree that Blockbuster seems to be slow. I have so much more than Netflix, yet they seem to be one step behind. But after Blockbuster responds by delivering movies online (maybe through appleTV?), what’s next for Netflix?
One idea for Blockbuster: Non-digital distribution (DVDs, VHS) has turned away so much business due to physical copies not available. Digital distribution through Tivo, computer, and AppleTv don’t have this problem. But not everyone has the equipments or would like to watch movies on computer to take advantage of this, so what if Blockbuster can strike a deal with studios to print copies of movies on-demand at their local store? Obviously, it could be too expensive to do this, but maybe burning technology has become quicker (in minutes) and come down in price to justify this? This way, they will never lose business due to out-of-stock issue anymore.
If you spend millions dollars on TV ads or marketing. You couldn’t beat Netflix business model. I have secret idea how to beat Netflix less than 1 sec.
1. Launch Extra Game Titles (PS2, Xbox, etc) for free.
2. No cost. You can rent movie and plus game title for free.
How many college students willing to buy that idea?
I bet you 40% will drop netflix and switch to Blockbuster access. Netflix does not have game section. Blockbuster, I see many game section in store. Why haven’t you use that idea? Give me dumb why you didn’t you have game section?
Ohhh… you got a college degree for marketing.. duh… Come on man use common sense when you do marketing. Do like Microsoft do. They add lots package & Icons for Windows XP.
You need Game Section.
Blockbuster was responsible for scaring customers by adding LATE FEES charge back then. Many dropped out blockbuster due to greed and switch to Netflix. They like the services.
Can you bring back customers and ask for forgiveness? I don’t think so. People would say “no to blockbuster.”
Blockbuster have $5.23 billion NETFLIX will have $ 6 billion soon.
Also NETFLIX, if you deliever late DVDs… You better watch out startup competitor growing monster. They are going to deliever DVD faster and cheaper. $2.50 for 5 DVDs. Whos going to do it?
Any startup guys will.
Just watch… TECHCRUNCH readers. They want to make $2.50 for 5 DVD delievery.
The way Blockbuster attempts to demonstrate that their service has an advantage over Netflix due to the fact that you can take movies that you receive through the mail back to a local store kind of defeats the whole purpose of getting them in the mail in the first place, doesn’t it?
I switched to Netflix a couple of years ago for three reasons, 1.) I got sick of Blockbuster’s late fees when I didn’t get a movie back on time, 2.) I liked the ease of getting movies via postal mail, and 3.) I hate big companies like Blockbuster who believe they can snuff out all the little guys.
Back to returning movies to the store, is it really necessary? You get a movie, watch it the same day, mail it back the next day and then get another one the day after. If you are at the minimum at the two movies at a time option, you can literally watch at least four movies a week. Not a bad deal for $15 bucks a month.
In my opinion, Blockbuster’s purchase of Movielink just puts them $20 million (or whatever they paid for it) deeper in the hole with still no clear advantage over Netflix with the acception of being able to visit a local store.
“This is clearly a hedge move by Blockbuster, which is locked in a death spiral with the cheaper and more convenient Netflix.”
This is a amatter of opinion… I personally use the Blockbuster service and am extremely happy with it. Fairly priced and fantastic service.
Now, as a matter of this investment… personally, I don’t thinkg Dig downloads is where its at right now unless tied to the cable provider. Now, if either rental service finds a way to deliver video games in the mamil service… I think it will be am advantage - again, just an opinion
David,
Agree with some of your points. For people who are attracted to the mail option and only watch 1-2 movies per week, Blockbuster in-store option doesn’t offer any value. But there are other types of customers: people who want to watch 2 during the week (take them until Friday to finish) and 1-2 over the weekend (which makes it impossible using the 2 out option at Netflix), people who like the whole “spur of the moment” in deciding which movies to watch, people who want to physically “shop” for movies, new release junkies, and people who buy things just because they are perceived to be cheaper. For these types of people, Blockbuster offers more value than Netflix.
The question is what percentage of movie renters falls in the category above. I feel that if Blockbuster can make the store experience better, the percentage could be quite high. To me, Blockbuster has a clear advantage in this game. Whether they can use it is a different matter, but it seems that they have had some successes in taming Netflix so far.
I used to be a diehard Netflix customer, I watch a lot of movies and was sick of BlockBuster late fee’s and lack of new selections unless you where there on new release day when they opened.
Netflix server was just ‘Okay’ between getting scratched or broken DVD’s and waiting much longer than I wanted for new releases I was not a ‘very happy’ customer but I was happy to not give my money to BlockBuster for the time being.
After awhile I really started to miss not being able to walk down the aisles of a brick and mortor store browsing for movies you forgot about or discovering some you missed (yeah its easy to search from Netflix but its not the same)
When BlockBuster dropped the late fee’s (kinda) and added ‘in store return for mail rentals’ I jumped at it and have not looked back at Netflix, I watch 24 movies a month now for $17 I get twelve in the mail and twelve in store, Netflix will never be able to compete with that and now that BlockBuster is going to be offering ‘movie downloads’ I’m sure Netflix is shaking in their boots.
Netflix will never have me as a customer again especially since they continued to charge my credit card for the service a full year after I cancelled and they did it illegally by changing my expiration date in their records on my credit card. I eventually got all my money back plus an additional $750 after my attorney contacted them, (they settled within minutes without even getting a manager involved, appears they are familiar with this) the kicker is I have spoken to several other people who have been ripped of by Netflix the same way, it appears to be in their business model.
BlockBuster has many other cards to play to stay ahead of the game, all of them will benifit us, thank god for competition.
LOL. Oh Michael, you keep me young. Saying blockbuster will end up in the deadpool from the netflix competition is like saying bestbuy will end up in the deadpool because you can find electronics much cheaper on countless websites. The brick and mortar business world in America works much differently then the goofy, lots-of-things-don’t-make-sense internet world which you are used to, please don’t try to be an economist.
“Dear Blockbuster” I think you hit a major point in your post. Games added to either service would be a huge hit. I use BlockBuster because there is a store around the corner which makes it easy to pick up that last minute movie, I’ve heard rumors that they might start letting you turn in online movie rentals for in-store game rentals. My kids (and me) would love that.
I have always been a little surprised at why movielink has never taken off, simply because I use it all the time. I love it, and no I don’t work for them. They have a descent selection of movies, the prices for rentals are always $3-$5, and I never have to return a damn thing. I think it’s perfect. Especially for flights where I get so burned out and can’t work on the plane anymore, I can just watch a movie. I hope blockbuster puts some effort into this one and makes the service even better.
Blockbuster had their day, Netflix is really the rulers of the zone and why love just BitTorrent? Undernation and the Warez sites are just as cool.
Also, I’ve checked out MovieLink and I just can’t take it. The biggest issue with direct downloading of movies is the DRM issue as well as the playback necessities. Most people don’t wish to watch movies on their computers (some people don’t even know how to play movies on their computers) and pretty much .1% of consumers know how to port movies and connect their computers to their TV sets for perfect watching. I highly recommend that these types of ideas for direct download fasten to other forms of media or the consumer will need to learn how to move past their safety zone. The sad part is, the technology exists, the majority of people are just still in the dark.
Blockbuster will need to learn how to use their physical stores as said above but they will need to learn how to integrate their brand and consumer loyalty. Blockbuster has some perfectly stupid consumers who are loyal to the end because they have no where else to go or can’t even think of a world without their beloved blockbuster (Netflix just isn’t even in their view, for most consumers can’t even make a folder on their computer and/or desktop)… Blockbuster needs to tap that stupidity for the best financial gain…when Blockbuster gets into that mode, the web is their next oyster….I agree with the Blockbusters needing of just becoming new distribution centers for Amazon, that would finally make their profits soar rather than allow their business to drop down the chute.
How exactly is Netflix “more convenient?” Cheaper, yes (we’ll see if their self-imposed price cut kills them off), but convenient? Dude, how many Blockbuster stores are there? And you can walk into any of them and use them instead of the mail-in service.
So What!!
That’s what I (and thousands upon thousands) of BlockBuster users say to downloadable movies.
So what!!
NetFlix will NEVER be able to compete with BlockBuster because they will never be able to provide BB BIGGEST benefit… a physical store.
Do you understand how HUGE BlockBuster’s “value proposition” is???
“3 movies out at a time” is really SIX at a time for BlockBuster.
I get three online, go to a BlockBuster location and use them as coupons to get FREE in store rentals. What does NetFlix have? The ability to WAIT for a 4GB download to watch a movie?
I get INSTANT gratification. And, while I’m watching my 3 in-store movies, my next 3 online rentals are already on their way - often before BlockBuster ever receives my returns, because they are “checked in” at the store.
“Downloadable movies” sounds good; but until a large portion of the population has a PC hooked to their main TV and until they also have fiber (or super fast broadband) connections. Downloadable with NOT be able to compete with the real thing.
Will, BB make NF go out of business, maybe, maybe not… but, the fact remains that more and more people are seeing the value that BB is offering and joining the revolution.
dK