Blockbuster Almost Done Making "Triple Play." Didn't That Star Billy Baldwin?

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On Friday, Variety was reporting that Dallas-based Blockbuster Video was in "advanced talks to acquire Movielink," a movie-download site launched by NBC Universal, Paramount Pictures, Sony Pictures, Warner Bros. and MGM five years back. (Yeah, it was so successful that till now, most likely, you never heard of Movielink.) But Variety also noted on March 2 that "other buyers are still apparently kicking the tires of the studio-owned download site," meaning Blockbuster was just one would-be new owner.

Well, the subscription-only TheDeal.com reports this morning that Blockbuster will, most likely, take over Movielink as soon as this week, once it finishes its due diligence of the company -- for which Blockbuster will fork over some $50 million, according to sources. "It could still fall apart," a source familiar with the takeover tells the online biz mag. "But it looks like a good deal for all parties involved." Makes sense: Blockbuster's doing surprisingly bang-up biz against longtime rival Netflix (helps to have a chain of brick-and-mortal stores, go figure), and it's also an investor in video-on-demand company CinemaNow.

Reports TheDeal, the acquisition of Movielink would complete what Blockbuster CEO John Antioco refers to as a the "triple play" allowing customers to get their videos through the mail, their television sets and now their computers. And in stores. Can't forget those stores. The complete story's after the jump. --Robert Wilonsky


Blockbuster-Movielink almost done
The video rental chain is set to acquire the download-to-burn DVD provider for $50 million.

By Richard Morgan

Blockbuster Inc. is expected to complete its due diligence of Movielink LLC this week, in advance of a takeover of the film-downloading site for a price sources put near $50 million.

"It could still fall apart," said a source familiar with the takeover talks. "But it looks like a good deal for all parties involved."

Movielink, set up as a joint venture in 2002, is the first studio-backed service that allows online users a legal means to obtain download-to-burn DVD movies. Its partners are General Electric Co.'s Universal Studios, Metro-Goldwyn-Mayer Inc., Time Warner Inc.'s Warner Bros. Entertainment, Viacom Inc.'s Paramount Pictures and Sony Pictures Entertainment, which also picked up the interest of MGM on buying into that studio in 2005.

Blockbuster, which dominates the stagnant bricks-and-mortar video rental business, is keen on advancing what chairman and CEO John Antioco calls a "triple play" of video rentals through stores, mail and online downloads. To that end, the Dallas-based company has recently made inroads against Netflix Inc. as a late-comer to the industry's rent-by-mail segment.

Meanwhile, as an online player, Blockbuster already owns a piece of CinemaNow Inc., which bills itself "the global leader in broadband video-on-demand." But Marina del Rey, Calif.-based CinemaNow also counts Cisco Systems Inc., EchoStar Communications Corp., Lions Gate Entertainment Corp., Menlo Ventures and Microsoft Corp. among its many investors.

Although Blockbuster declined to comment on Movielink, it's common knowledge that a deal between the two was nearly consummated in mid-2006. Salem Partners LLC, a Santa Monica, Calif.-based financial advisory firm, was even brought in to help shop Movielink but came up short after talks with a few media distributors.

Some studios behind Movielink claim they've planned to exit the business as expeditiously as possible after successfully incubating it. Their motivation to sell has centered on Movielink's burning-to-DVD feature, which, these studio backers fear, could eventually upset major DVD retailers like Wal-Mart Stores Inc. and renters including Blockbuster.

To date, however, the movie-downloading business, which barely topped $100 million last year, continues to be dwarfed by the $25 billion consumers spend each year on video rentals and purchases. But it could gain momentum not only from Blockbuster's likely takeover of Movielink but also from Netflix's launching a 1,000-title streaming video service early this year.

Still, as a trip to Movielink's official Web site reveals, technology remains an issue. "In order to enjoy the Movielink service, you must use Windows 2000 or XP, which support certain technologies we utilize for downloading movies," the site said. It also advises would-be users that Movielink does not support Apple Inc.'s Macintosh system or Linux and that, "as of May 2, 2005, Movielink no longer supports Windows 98 and ME operating systems."

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