Major US video-rental chain Blockbuster acquires Internet video business Movielink

Both Movielink and Blockbuster have been in the entertainment business for several years now. Blockbuster with its eponymous video-rental stores and Movielink as the Hollywood studios' "legitimate" answer to peer-to-peer (P2P) models. The two hope that in fighting back-to-back they might just have a chance to see off the encroaching IP jackals.

The Movielink web download service, though a pioneering venture for the previously (although increasingly less-so now) web-shy Hollywood establishment, has always been outpaced by sites such as Bit Torrent and KaZaa because, unlike the illegal sites, Movielink's diligent copyright policies and safeguarding methods have proven too irksome and inconvenient for the freewheelin' geeks who lurk in a web where the men are men and the content sheep are noticeably nervous. The upshot of this has been that Movielink has never really taken off.

Blockbuster also had a big chunk taken out of its once dominant market share in the bricks and mortar video rental business by the ingeniously simple www.netflix.com online video rental service offering nearly unlimited rentals for about US$20.00 per month delivered to your door as fast as you can pick 'em and click 'em on the easy-to-navigate website.

By comparison Blockbuster customers have to drive to a store where they are charged US$3 to $5 a rental as well as an infamously draconian 'late fee' banged on after 24 or 48  hours and rarely, if ever, removed after one or two days. For Blockbuster even death isn't enough to stop your executor being hit with demand for a late fee.

Unsurprisingly, Netflix's easy system and "no late fee" policy hit Blockbuster right in the Blocks

To its credit, a smarting and watery-eyed Blockbuster picked itself up off the floor, readjusted its trousers and quickly reinvented itself in the Netflix web/home delivery mode, as well as leveraging its storefronts as a "customer service bonus" compared to Internet.

The company also – and very cheekily – addressed the poor image it had gained thanks to its rapacious late fee strategy by turning overnight from poacher into gamekeeper and fronting a national "just say no to late fees" campaign. The shameless hypocrisy was enough to rescue the company from incipient bankruptcy.

Now, in confirmation of its own re-invention Blockbuster, has bought Movielink and the acquisition is seen by analysts as a particularly shrewd and smart move as the deal gives Blockbuster access to one of the largest libraries of legal video-on-demand and for purchase  movies and TV content from the likes of Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Pictures and Warner Bros. as well as more than 30 other studios.

The agreement also lets Blockbuster offer customers entertainment content that is downloadable not only to PCs but also to the increasing number of portable devices, TV-connected home networks and set-top boxes in the nascent US IP entertainment sector.

"Our acquisition of Movielink, with its associated digital content, is the next logical step in our planned transformation of Blockbuster," says Jim Keyes, Blockbuster's chairman and CEO.

Jim Ramo, the CEO of Movielink adds, "With Blockbuster's ability to leverage its store network, online assets and marketing expertise, [they] should be able to grow the market for digitally-delivered entertainment content."

Blockbuster says it will continue to operate the Movielink website as well as to "eventually make elements of the service available through blockbuster.com."

Financial details of the acquisition have not been revealed but word has it that the all cash deal was concluded "for significantly less than the $50 million valuation mentioned when negotiations began in March."