April 10, 2008 7:23 AM PDT

Blockbuster eyes streaming to TVs

By Reuters/Hollywood Reporter

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The home video giant is developing a set-top device for streaming films directly to TV sets and is expected to announce the offering sometime this month.

Blockbuster declined comment, but a spokeswoman for the company said, "We're talking to numerous companies and vendors about products, services, alliances, and initiatives that can help us achieve our mission to transform Blockbuster into a company that provides access to media content across multiple channels--from our stores, by mail, through kiosks, through downloading, through portable content-enabled devices--so it's not surprising that there are rumors out there."

The device would join a growing roster of devices that aim to bring broadband video to the living room, including Apple TV, which hasn't quite seen sales match the hype surrounding the product. Blockbuster rival Netflix also has indicated that it will compete in this market with a similar device being created with LG Electronics.

The product would be an offshoot of Movielink, the online-film service Blockbuster acquired last year that allows consumers to watch films licensed from the major studios on their PCs.

Delivering movies to TV might be the most audacious attempt yet that Blockbuster is making to reinvent its brand as digital delivery weakens the viability of its retail footprint. But by offering a home-based alternative to its stores, Blockbuster risks cannibalizing its core brick-and-mortar business in the hope that its brand will be a force online.

The device is believed to be a standalone product akin to Apple TV, as opposed to embedding a Blockbuster-branded service in such existing devices as Microsoft's Xbox 360 or TiVo.

While going it alone could give it a distinctive position in the crowded "over-the-top TV" marketplace, that won't come without significant investment in marketing and manufacturing, though the latter cost might be shared with a consumer electronics company that has yet to disclose its participation.

Blockbuster knows all too well the importance of online film rentals. When Apple said in January that iTunes would adopt a rental model, it sent Blockbuster's stock plummeting 17 percent to an all-time closing low of $2.69. Its shares closed down 15 cents, or 4.5 percent, at $3.20 on the New York Stock Exchange on Wednesday, a long way from its 52-week high of $6.61.

Movielink was created in 2002 by MGM, Paramount, Sony, Universal, and Warner. Five years later, the underperforming venture was sold to Blockbuster for $6.6 million. The deals give Blockbuster online rights to about 6,000 movies, though there are restrictions on moving content beyond PCs and TV.

Blockbuster is at work on integrating Movielink into Blockbuster.com in time for the second quarter.

In addition to Movielink, Blockbuster CEO James Keyes indicated in November that he was in talks with handset makers about delivering movies to mobile phones. The company also is developing in-store kiosks for downloading films.

Story Copyright © 2008 Reuters Limited. All rights reserved.

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