Posts tagged ‘Sonic’

Ass Backwards, Again

Blockbuster (BBI) has outdone itself now. It just announced a trial of in-store kiosks that will allow consumers to download movies directly into a portable media player (PMP) to take with them. For now, only the Archos player will be supported.

Let me get this straight.

Blockbuster wants you to hop in your car and drive to one of their outlets. Using soon-to-be-five-dollar gasoline. Just so you have the privilege of downloading a movie onto a portable player.

They do seem to have this whole thing ass backwards, don’t they?

Hello! Ever hear of the Internet? Why in the world isn’t this a download to your PC and then a transfer to the PMP? (Yeah, I know, the answer is the studios and their oh-so-customer-friendly Digital Rights Management fixation.) Blockbuster’s insistence on driving consumers to their increasingly useless stores has clearly reached new heights.

Meanwhile, Netflix (NFLX)–while noting its ultimate future is in downloads–predicts that its DVD mailing business won’t PEAK for 5 to 10 years. That tells me the smart money is on DVDs (either standard or Blu-ray) to last some time. I agree.

It’s not that downloads aren’t the preferred solution–personally, I can’t wait–but that universal adoption is a long way off. Why?

  1. The studios’ love affair with DRM, artificially reducing the availability of video fare and making it difficult to transfer media to other devices
  2. Still no inexpensive, simple solution in sight for getting video from the PC or Internet to your TV.

Here’s an idea: If you insist on making people drive somewhere, at least let them leave with a disc. Use Qflix technology from Sonic Solutions (SNIC) to print a fully licensed DVD out of the kiosk instead. That’s portability and ease-of-use in a single package. As I’ve noted before, this would allow Blockbuster to reduce/eliminate inventory, and get more Hollywood back catalog titles into customers’ hands.

[Sonic holds the key technology patents on download-to-burn, which has been approved by the DVD Copy Control Association (DVD-CCA). This allows discs to be burned with CSS encryption, pleasing the studios and making such copies legal commercial DVDs.]

Sonic was working with MovieLink, prior to its purchase by Blockbuster, to push this tech into the end user market. While disc burners for consumers probably won’t go mainstream anytime soon, Sonic is in trials with kiosk makers. It’s a nice transitional solution until discs are truly dead. Why Blockbuster has made no use of this technology is a puzzle.

But then so is everything else it does these days.

Disclosure: I hold no position in any of the stocks mentioned here.

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May 29, 2008 at 12:55 pm 1 comment

Blockbuster: Driving Off A Cliff?

The Hollywood Reporter had a story last week that Blockbuster (NYSE: BBI) will soon announce a movie rental set-top box. Everyone who has written about it has noted it will compete against–among others–Apple TV (NASDAQ: AAPL).

That’s true, if you can call “eating dust” a competition.

To the extent such dedicated set-top boxes ever catch on (and I have doubts), Apple TV is Lightning McQueen to Blockbuster’s Mater. Apple is in the hardware business, you can bet it’s in this race to win. Frankly I doubt it even cares that much about the movie revenue. But those rentals are Blockbuster’s raison d’etre.

Blockbuster still seems like a deer caught in the headlights, and has been playing follow the leader with Netflix (NASDAQ: NFLX) for some time. This recent development simply copies the deal Netflix announced with LG Electronics awhile back. While I wouldn’t go so far to say it is doomed (yet), Blockbuster needs a serious strategy tune-up.

First it has to rid itself of the retail store “boot”. For too long Blockbuster has focused on driving traffic to its locations, which it naturally feels obligated to earn money on. But this is the digital age, and despite trying desperately to leverage them, Blockbuster’s locations aren’t the assets it thinks they are. Instead of trying to earn a return on real estate, Blockbuster should have been shedding stores. I understand the real estate market was pretty good last year, probably a great time to divest. Oops.

This is the same mistake Toys-R-Us made, dipping its toes into the on-line pool but afraid to jump in until it was too late.

Blockbuster does have some options left. The purchase of Movielink gives it a leg up in on-line delivery. Going to market with its own STB is a mistake, however. First, it’s not at all clear there would be much demand for the box; just look at Vudu. Second, Blockbuster doesn’t exactly present a compelling co-branding opportunity for CE manufacturers. And depending on the arrangement, the costs associated with such a move could easily outweigh any additional revenue generated.

Far better to package Blockbuster-to-the-TV as a service. True, Apple and TiVo (NASDAQ: TIVO) aren’t likely to sign on. But it could partner with multiple CE manufacturers who can build home media transfer capabilities into their DVD or Blu-ray players, using technology from the likes of DivX (NASDAQ: DIVX) or Macrovision (NASDAQ: MVSN).

These solutions (perhaps not so coincidentally called “Connected” by both firms) are licensed to CE manufacturers, vendor neutral, and built-in at the chip level. Movielink gets films to the PC, and “Connected” easily gets them to the DVD or STB, without requiring an additional box. In fact, DivX has a good relationship with LG already–wouldn’t surprise me to see Netflix go with DivX Connected on an LG box instead of with a branded version.

This makes even more sense when you consider the other advantage Movielink brings to Blockbuster: a partnership with Sonic Solutions (NASDAQ: SNIC). Sonic’s Qflix is the only legal way to burn a studio DVD remotely, which allows Blockbuster to say goodbye to much of its costly inventory. It will soon be feasible to download movies to PCs and then burn them at home. (The disc is dead, long live the disc.)

Blockbuster still has a chance in this race, but it had better get out of first gear. Fast.

Disclosure: I don’t hold positions in any the stocks mentioned in this article.

April 12, 2008 at 8:03 pm 2 comments


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