Blockbuster boosts online offer

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Video rental retailer Blockbuster Inc. has acquired Movielink, one of the nation's leading movie download services, in a move that will help it compete with Netflix.

The agreement, whose terms were not disclosed, gives Blockbuster access to one of the largest libraries of downloadable movies and an array of television content.

"Our acquisition of Movielink is the next logical step in our development as a company," said Karen Raskopf, senior vice president of corporate communications. "We're committed to keeping pace with the expanding needs of customers and this acquisition lets us get into the download business in a cost-effective way."

The acquisition is part of a large growth plan that takes on competitor Netflix, which debuted its download-a-movie rental plan earlier this year. Now Blockbuster is getting into the market, too. Earlier this summer, Blockbuster entered into Netflix's trademark DVD-by-mail business in a price war. Blockbuster began offering the popular services that made Netflix king of the market, its most popular three-out unlimited movie plan costs $16.99 a month, $1 a month cheaper than Netflix's similar plan at the time it launched. Netflix has since dropped its price to match. Netflix declined to comment for this article.

According to Raskopf, Blockbuster plans to operate the Movielink service. Eventually, elements of the service will be made available through its Web site at

Blockbuster.com.

Founded in 2002, Santa Monica, CA-based Movielink is a joint venture of Metro-Goldwyn-Mayer Studios Inc., Paramount Pictures Inc., Sony Pictures Entertainment, Universal Pictures and Warner Bros. Studios.

Movielink offers consumers downloadable content via PCs, portable devices, television-connected home networks and approved set-top boxes. Content can be downloaded and stored for up to a month. Once a movie is watched, the file will automatically delete itself within 24 hours to discourage piracy.

The acquisition of Movielink gives Blockbuster license agreements with the five founding studios, as well as 30 other studios, television-content distributors, and foreign and independent content providers, all of which greatly expand its content library.

Blockbuster will now have access to more than 3,000 downloadable titles, versus 2,000 on Netflix.

The move helps even the playing field, although Netflix still offers more content with more than 80,000 titles available on DVD, versus the 70,000 titles on the Blockbuster site. Still, Blockbuster does not carry titles with more than an R rating, such as NC 17-rated films.

But Netflix is beginning to feel the pressure of the competition. The company's second-quarter revenue report checked in at $303.7 million, a 1 percent decline from the $305.3 million revenue reported for the first quarter of 2007, which the firm attributed to competition and slow subscriber sign-up.

For the first time in the company's history, Netflix actually lost more customers than it gained this quarter. It ended the second quarter of 2007 with about 6.7 million total subscribers, representing a 30 percent year-over-year growth from 5.2 million total subscribers at the end of the second quarter of 2006. This was a 1 percent decline from 6.8 million subscribers it had at the end of the first quarter of 2007.

Churn for the second quarter of 2007 was 4.6 percent, compared to 4.3 percent for the second quarter of 2006 and 4.4 percent for the first quarter of 2007.

Subscriber acquisition costs for the second quarter of 2007 was $44.02 per gross subscriber addition and $47.46 for the first quarter of 2007.

Blockbuster reports having 3.6 million subscribers to its DVD-by-mail service and has 2 million customers come through its retail stores daily. n

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