Best Buy launching digital movie service with CinemaNow

One of the nation's biggest sellers of DVDs is making a leap into movie downloading.

Best Buy Inc. is expected to announce today that it is partnering with online video provider CinemaNow to create a movie downloading service that would be integrated into most devices the electronics retailer sells that can be connected to the Internet, including televisions, DVD players, computers and phones.

Facing an industrywide decline in sales of physical media such as DVDs and CDs, Best Buy has been making an aggressive push into digital delivery. Last year the company acquired online music service Napster for $121 million.

Best Buy's partnership with CinemaNow, which is expected to be launched late this year or early next year, comes as DVD sales are down about 13% so far in 2009.

"Digital is developing as a channel and we're forecasting that by 2012 it will be a significant, double-digit percentage" of the revenue generated by movies watched at home, said Ryan Pirozzi, director of digital media for Best Buy.

The new movie service has not yet been named. Best Buy plans to load software for it on electronic devices from manufacturers that include Samsung, Sony, Panasonic and Toshiba.

Legal movie downloads have been available for about a decade, but the business has been impeded by high prices and limitations on availability and consumers' ability to play video on different devices, which have made DVDs and illegal downloads more attractive.

The market has recently become very competitive, however, with rival online movie services from Amazon.com Inc., Netflix Inc. and Apple Inc.'s iTunes Store.

Making online movie distribution simpler for consumers will be a top priority for the Best Buy service, Pirozzi said. The company plans to experiment with numerous business models including purchases, rentals, subscriptions and advertiser support. It also will emphasize the ability to watch movies on televisions as well as computers and mobile devices.

"This is certainly a very crowded space and we're going to work to translate our customer insights into a more compelling service than those out there currently," Pirozzi said.

Best Buy's biggest advantage is its retail locations. The new movie downloading service will be marketed in the company's stores, with employees trained to explain and promote it to customers.

The partnership to be unveiled today expands on one announced earlier this year in which CinemaNow downloads have been available on Best Buy's website and some of the devices the retailer sells. The new partnership, scheduled to last at least three years, would give Best Buy its own digital movie brand.

CinemaNow will run the back-end technology for the service, as it does for Blockbuster Inc.'s similar offering. Best Buy, based in Richfield, Minn., will handle design and pricing. Best Buy will pay CinemaNow, a unit of Sonic Solutions of Novato, Calif., a fee plus a percentage of revenue.
via LA Times