Blockbuster Inc. will debut a new service Tuesday that delivers movies to your home via the Internet, as the DVD rental giant looks to expand the ways it can provide movies to customers.
The service will be called “Blockbuster on Demand” and requires a box (pictured) made by 2Wire Inc. At least initially, the box is included free if customers rent 25 movies in advance for $99.
No other pricing plans are currently offered, said Jim Keyes, Blockbuster’s CEO. After the first 25 movies are watched, prices will start at $1.99 per film. The box will ship in time for the holidays and can be ordered Tuesday at Blockbuster.com.
Web-based movie delivery is “developing and we’re learning about consumer patterns,” Keyes said. The service “is for early adopters. It’s our goal to gather consumer knowledge to move forward.”
More than 2,000 movies and TV shows will be available at launch time, with more titles to be added later.
Blockbuster has been closing stores over the past year and announced a quarterly loss earlier this month. But losses have narrowed as the chain remakes itself.
"They're operating fewer stores, but they're making more money on a per store basis," Stern Agee analyst Arvind Bhatia told Reuters after third-quarter earnings were released. Blockbuster's shares have been trading for less than $1 since Nov. 11. Shares closed Tuesday at 95 cents.
In some respects, the Blockbuster online delivery service is similar to what Netflix offers.
The Netflix “watch instantly” service can deliver more than 12,000 movies or TV shows through a box that connects to your television. The box is attached to an Internet router or accessed via Wi-Fi to stream movies. (This Eric 2.0 post provides more information on other devices that work with the Netflix Internet service.)
There are three key differences with Blockbuster On Demand, Keyes said.
First, it will offer (mostly) new releases.
“We are focusing on quality vs. quantity,” Keyes said. “The selection will be consistent to what you see in a Blockbuster store.”
A caveat: Once a movie is released to DVD, it will not immediately be available for Blockbuster on Demand. That could take an additional 30 to 60 days for most new releases. “The Dark Knight” will be available immediately, Keyes noted, since Warner Bros. will release the movie for DVD and video-on-demand services the same day on Dec. 9.
“But that’s the exception and not the rule,” he said, noting the studios set separate release dates for DVDs and on-demand content.
Still, it could be months or years before such a title appears on the Netfix Internet service. Netflix wants to keep prices low, so it won’t pay to have new releases as part of its subscription service, the company said in a recent interview.
That leads to the second difference. Blockbuster on Demand is pay as you go, with movies costing between $1.99 and $3.99, Keyes said. You have 30 days to watch the movie, but only 24 hours to finish watching once you start.
With Netflix, you pay a minimum of $8.99 a month to get the Internet streaming service. However, you can watch as much as you want for that price.
Third, Blockbuster and 2Wire also can deliver high-definition video. After a customer orders the movie, it will start playing “by the time your popcorn’s popped,” said Pat Romano, 2Wire’s CEO.
Netflix currently does not offer HD content for its Internet service.
Blockbuster is competing against more than just Netflix. Both Apple and Amazon offer a download service with pay-as-you-go content. But both of those services require a computer as a go-between, at least at this point.
Blockbuster and Netflix, on the other hand, require only a high-speed Internet connection. (You could rightly argue that if you already have a high-speed Web connection, you have the computer needed for the other services.)
Keyes realizes there is a lot of competition to bring movies straight to your TV over the Internet.
“Our competitive advantage is that we already own the customer for home entertainment,” he said. “And we think we can migrate them to other” forms of delivery. “We are encouraging our customers to use multiple channels.”
Blockbuster has 60 million customers; the company won’t break out what services they use. Keyes acknowledges the vast majority come from stores.
Blockbuster offers four channels of delivery, including the Web-based on-demand service.
Store-based DVD rentals and movies by mail are established programs, but Blockbuster is also experimenting with kiosks to deliver movies directly to a portable device.
As the company learns more about customers' behavior over the next six months, Keyes said of the on-demand service, “the offering will transform itself.”
Romano, from 2Wire, agreed. He said his company’s box “is capable” of doing more than movie rentals, “but we want to get feedback and figure out how to grow.
“The platform has the legs for Blockbuster to expand it at will,” he said. The box itself is the size of two boxes of movie candy, a press release describes.
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