Blockbuster Buys Movielink to Compete with Netflix

Blockbuster recently purchased movie download service Movielink, which was started in 2002 through a joint venture of Metro Goldwyn Mayer Studios Inc., Paramount Pictures, Sony Pictures Entertainment, Universal Pictures, and Warner Bros. Studios. Blockbuster hopes to compete with companies like Netflix, which also offer their members the option of downloading movies to rent or own. Both companies offer their customers DVD rentals through the mail; Blockbuster currently has 3.6. million subscribers, and Netflix has 6.7 million subscribers.

Smart move—too bad it’s about two years too late, said Douglas A. McIntyre on 247wallst.com. In 2005, Blockbuster should have used data from its gigantic subscriber base to lure new customers in to use its stores, its DVD-through-the mail service, and its movie download options. “It would have been the most compelling package in the industry.” But instead, Blockbuster waited while everyone from cable companies and TiVo, to Apple and even Walmart got in on the act. “It waited too long.”

Blockbuster knows exactly what it’s doing, said Kevin Maney on Portfolio.com. Sure, Netflix has a big head start on them, but it doesn’t matter because until recently, movie downloads to PCs had neither “fidelity” nor “convenience,” and that’s “a losing formula.” But now it’s becoming easier to download movies, more and more people are getting used to the idea of it, and “multimedia laptops offer wide bright screens and nice sound.” As Internet movie downloads continue to move in this direction, “they will become a bigger business. And that’s what Blockbuster sees coming.”

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This new strategy better work for Blockbuster, or they’re finished, said Scott Gilbertson on Blog.wired.com. “It could be a last gasp for the once king of movie rentals.” But Movielink does have the web’s largest digital movie archive, and the marriage of the two companies positions Blockbuster “to be the only 3-in-1 service with mail-in, online and in-store movie rental options.” If they want to survive, though, they need to consider their high operating costs—“namely rent on all those brick and mortar stores.”