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Blockbuster and Movielink: Connecting "Links" For Success?

Friday, 10 Aug 2007 | 8:56 AM ET
AP

There's no question that Blockbuster'slivelihood is under attack--the business of driving to a store to rent a DVD and driving back when you're done is threatened from video on demand, and digital downloads, especially since both technologies are getting better and faster. So, looking to avoid going the way of the Beta Max, Blockbuster just purchased online movie downloading company Movielink for under $20 million.

Blockbuster has been trying to evolve since Netflix's mail-order DVD business. Netflix became such a successful alternative to getting in the car (with Netflix, they mail you DVDs from your online list so you always have three at a time). Blockbuster launched its own version, "total access" which works exactly like Netflix. The only difference is that after your DVD arrives by mail, you can either mail it back (like Netflix) or return it to a Blockbuster store.

So why Movielink? Movielink has been around for years--and you've probably never heard of it --which tells you a lot about its success or rather, lack thereof. And Movielink had so much working in its favor back when it launched back in 2002 as a joint venture between Paramount Pictures,Sony Pictures Entertainment ,Universal Studios (parent company is GE which owns CNBC) and Warner Bros (yup, all the majors except Disney ,20th Century Fox and Lion's Gate, who participated on a non-exclusive basis). But it was the fact that all these big players were involved that slowed it down.

I remember, years ago, executives at two of the involved studios complaining to me that there were too many cooks in the kitchen, too many egos, and the kind of rule-by-committee decision making that kept Movielink from being at the cutting edge. The company did evolve over time--selling download-to-own, instead of just video-on-demand for your computer, and buying a technology to allow users to burn the movies they've purchased to DVD (so you can watch them on your TV and not just on your computer). But the system never really took off: illustrated by the fact that it sold for under $20 million, instead of the $50 million that was originally discussed as a value for the company.

Will it help Blockbuster? Blockbuster certainly needed something to transition to the video-on-demand age, and this technology and the licensing agreements are already in place. The technology will need to be updated (Joost and BitTorrent's legal services are faster from my experience). But at least now having the Blockbuster brand (and in-store marketing) gives Movielink a chance. But boy, all the studios that spent so many long years and millions toiling over Movielink, must not be very happy that it all came down to this.

Questions? Comments? MediaMoney@cnbc.com

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.