Blockbuster, Best Buy to offer online movie downloads

Apparently Lionsgate CEO Jon Feltheimer had told industry analysts that Best Buy and Blockbuster are set to enter the growing movie download business during a conference call yesterday (see Studio CEO: Blockbuster, Best Buy to launch movie download services). While neither company has officially announced it, this is how Feltheimer spilled the bean “We have nearly a dozen active agreements in place for digital delivery of our content with such major players as Apple, Amazon, Microsoft, Blockbuster, Best Buy, and Wal-Mart, with more to follow”.

Full length movie downloads will take many hours to download at current broadband speeds) – but this is the future. But in the meantime, Netflix, Walmart, and Amazon (among others) already offer online movie downloads, so retailers have to respond or risk losing business (remember how Blockbuster lost in-store customers to Netflix’s mail-in DVDs).

Blockbuster has been looking for offer online movie downloads for a while now, In fact, I know someone at Blockbuster Canada who worked on movie downloads about 5 years ago (it wouldn’t have been successful at that time, given the limited broadband penetration). It’s only a matter of time before Blockbuster will launch a movie download service.

Overall, Blockbuster will have a tough time with their triple play of brick-and-mortar, mail, and online rental services. The long term question is what Blockbuster will do with its stores, because stores will become less and less relevant with movie downloads (I’m not saying there will be no stores). From a capital investment perspective, maintaining a large number of stores will be a white elephant. Also, I can only imagine that the Blockbuster franchisees must be making their funeral arrangements. Even if franchisees are given incentives for movie downloads (e.g. via in-store sign-ups), their revenue can take a drastic hit when movie downloads become mainstream.

Meanwhile, Best Buy is jumping in on the online bandwagon hot on the heels of Walmart’s recent moves. This is important because movie downloads will likely steal some of the retail video sales and Best Buy wouldn’t want to be caught napping without an online movie service. Furthermore, Wal-Mart currently accounts for about 40 percent of all DVD sales in the United States. By launching its own service, industry watchers say Wal-Mart can protect that DVD market dominance.

And what will happen when Google and Yahoo! decide to offer movie downloads!!