Blockbuster to rent movies, shows using on-demand box

Wednesday, November 26, 2008

SAN FRANCISCO -- Blockbuster Inc. will start renting movies and television shows through a new device that may give consumers another reason to bypass the struggling video chain's 7,500 stores.

The system unveiled Tuesday relies on a small box that connects to television sets and stores video after it's downloaded over high-speed Internet connections.

The player, made by San Jose-based 2Wire Inc., is based on the same concept as storage devices made by Apple Inc. and Vudu Inc. The devices are all meant to provide a bridge between the Internet and TVs.

Netflix Inc., a Blockbuster nemesis, has been trying to make the same leap with a video-streaming service that can be watched on TV sets through a variety of devices, including a $100 box introduced by Roku Inc. six months ago.

Blockbuster's foray into on-demand video also pits the Dallas-based company against instant-gratification services already offered by major cable carriers like Comcast Corp. and Time Warner Inc.

Although Blockbuster has closed hundreds of stores in recent years, its expansion into on-demand shouldn't be interpreted as a condemnation of its brick-and-mortar locations, chairman James Keyes said.

"We think the stores will remain relevant to consumers for quite some time," he said.

Blockbuster had previously been selling video downloads through Movielink, a service that it bought for $7.7 million last year. But Movielink option was primarily aimed at consumers who don't mind watching movies on personal computers or portable gadgets with small screens.

With its latest step, Blockbuster is appealing to the larger audience that prefers watching entertainment on big-screen TVs.

To help get its next downloading box into homes, Blockbuster is selling it as part of a $99 package that includes 25 on-demand rentals. After that, Blockbuster will charge at least $1.99 for each downloaded video. The on-demand rentals can be stored for up to 30 days, but must be watched within 24 hours of the first viewing.

The pay-per-view pricing differs from Netflix's "instant watching" service, which gives unlimited access to a library of 12,000 titles to any subscriber paying at least $8.99 per month for a DVD rental plan.

Blockbuster's on-demand service is starting out with 2,000 selections, but Keyes promises the movies will be of more recent vintage than Netflix's instant-watching service.

"We are emphasizing quality over quantity because we think quality is most important for our customers," he said.

Once a dominant force in home entertainment, Blockbuster has been wounded by Netflix's DVD-by-mail service, which has 8.7 million subscribers, as well as the on-demand options included in cable subscription packages.

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