Blockbuster lifts the curtain on its digital entertainment plan

Blockbuster Inc. isn't about to cede the emerging market for digital entertainment content to archrival Netflix Inc.

The company, No. 35 in the Internet Retailer Top 500 Guide, is set to roll out an interactive kiosk program at a select number of Blockbuster stores in June. Blockbuster has signed a testing agreement with NCR Corp., which develops kiosk and point-of-sale systems for the retailing industry, and is in discussions with other manufacturers of web-enabled handheld devices. "We are actively exploring options to distribute that entertainment content to our customers via many different digital platforms that are available and emerging in the marketplace," Blockbuster CEO Jim Keyes told analysts on the company's recent first quarter earnings call. "We also are acquiring digital entertainment distribution rights that we know would be appealing to our customers. In other words, growing the biggest library that we can establish."

Blockbuster, which in April began discussions to acquire Circuit City Inc., is moving aggressively into the digital entertainment distribution business. Though the company has yet to announce details, Blockbuster in June will also roll out a new digital download service on using technology from its acquisition of Movielink LLC in August. "Our acquisition of Movielink provided both digital content and a distribution tool," Keyes told analysts. "We have a new online service in beta testing now and we are planning to make it available to all customers in June. The extensive library of over 9,000 titles gives us one of the largest digital video on demand and day-date electronic sell-through libraries in the marketplace."

The market for digital entertainment distribution is heating up. Netflix, No. 17 in the Internet Retailer Top 500 Guide, on Tuesday announced The Netflix Player by Roku, a device that enables Netflix subscribers to instantly stream a growing library of movies and TV episodes from Netflix directly to the TV. The hardware, manufactured by Roku Inc. is priced at just under $100.

But Blockbuster also is looking to sign up more exclusive digital distribution agreements as the final component of its strategy. "We are actively exploring opportunities to acquire content and to develop partners for distribution to the personal computer, the portable device and ultimately to the home," Keyes told analysts. "Our goal is to be the most convenient source for media entertainment with the reinvigoration of our core rental business, the expansion of our retail offerings and our new digital initiatives."

Blockbuster is pursuing new e-commerce initiatives at the same time it's working to improve the overall performance of the business. In the first quarter Blockbuster posted net income of $45.4 million on revenue of $1.39 billion, compared with a net loss of $94.4 million on sales of $1.47 billion for the first quarter of 2007. Revenue declined as a result of operating fewer stores, the company says. Blockbuster no longer breaks out e-commerce numbers in its quarterly earnings. via internet retailer

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