Blockbuster STB necessary but no game-changer

Brick and mortar movie giant Blockbuster has teamed up with 2Wire, which makes integrated broadband devices, to distribute its recently launched 2Wire MediaPoint digital media player, an on-demand video set-top box (STB). The device, based on Blockbuster’s MovieLink PC service, joins a growing list of other over-the-top video boxes but was necessary for Blockbuster, analysts said, as it risks losing its relevancy in the face of other options.

Blockbuster was rumored to be launching an STB for streaming video back in April, and CEO Jim Keyes hinted at the possibility again during Blockbuster’s recent third-quarter earnings. As competition has increased from Netflix’s Roku STB and streaming video providers including Apple TV, Vudu and others, it was only a matter of time before Blockbuster bit the bullet.

“They have to get into streaming,” said Michael Wolf, research director at ABI Research. “This should just be one of many means. They should do what Netflix has done to get their service on the Play Station 3 or wherever else…They are going to have some challenges, but it is the direction they need to go.”

The service is being offered for $99 including 25 advance rentals off the Blockbuster website. Blockbuster is tapping the a la carte business model to differentiate its service from main competitor Netflix’s subscription service.

Although Netflix has the advantage of being integrated into a number of devices, including the Xbox 360 and TiVo, the Blockbuster tie-in means new releases will be available within weeks of leaving theaters, not months later as is often the case with over-the-top video like Netflix. After the required 25 rentals, movies are available starting at $1.99 each

Some analysts maintain that Blockbuster has already lost its relevancy, but Gerry Kaufhold, principal analyst at In-Stat, for one, believes that the movie giant is entering the market at the right time with the right message. According to In-Stat studies, in the face of an economic downturn, the absolute last thing consumers will cut back on is their broadband service. In that regard, Kaufhold said, anything that delivers content over broadband into the home makes broadband more valuable and is a smart move.

“If you sign up for a Blockbuster rental card at a store, they have you in their database, so they can market to an already well-defined customer base,” Kaufhold said. “They are basically subsidizing the box by providing it free with 25 rentals. It’s a smart idea in today’s economic client because it sounds like a really good deal. With people worrying about spending money, you are not buying the box, you are buying the movies.”