Blockbuster to expand digitally with CinemaNow (and Blu-ray)

Blockbuster to expand digitally with CinemaNow
-Rental giant able to deliver movies through some of the same devices as Netflix

By Jennifer Netherby
-Video Business, January 14, 2009

JAN. 14 | Blockbuster is joining with online movie service CinemaNow in a deal to deliver movies to Blu-ray Disc players, Internet-connected TVs, mobile phones and even the iPhone, the two companies will announce Wednesday.

The multi-year preferred provider agreement between Blockbuster and Sonic Solutions, which acquired CinemaNow late last year, will put the rental giant on some of the same devices through which its main online rival, Netflix, has already begun streaming its own digital content.

The joint service, to be called Blockbuster Powered by CinemaNow, is expected to debut on a variety of devices in the second half of the year. Those initial devices are expected to include the LG Blu-ray player and Internet-connected TVs with the Yahoo!/Intel widget.

Eventually, Blockbuster and CinemaNow hope to have a full ecosystem so a Blockbuster customer could download a movie to their Blu-ray player, transfer it to their PC and burn it to a DVD through a Sonic Qflix DVD burner or watch it on a mobile phone or other device, all under the Blockbuster banner.

"What this partnership is about is providing a branded entertainment option to get consumers their content into the boxes that surround them without having to get them to organize it themselves," Blockbuster senior VP of digital entertainment Kevin Lewis said.

Blockbuster already offers movie downloads through its 2007 acquisition of movie download service Movielink, which has been absorbed into Blockbuster.com. Going forward, it will discontinue using Movielink technology in favor of CinemaNow's in the areas where the two overlap. Blockbuster will continue to operate the online storefront and maintain its digital content deals with studios and suppliers.

"At its core, I think this deal allows both of us to focus on what we do best," Lewis said.

Sonic and the CinemaNow team will focus on the technology and the backend of the service.

The deal is non-exclusive, but Sonic will now primarily push the Blockbuster Powered by CinemaNow brand as it reaches out to consumer electronics companies and retailers for partnerships for CinemaNow, Sonic executive VP of strategy Mark Ely said.

Sonic also might adopt the new brand for some of the devices CinemaNow is already available on, if device partners agree to the change. CinemaNow offers movie downloads through Xbox 360 game consoles, Archos portable media players and has a deal with TiVo for Disney movies, among other consumer electronics companies.

"The CinemaNow brand will continue for some time," Ely said. "The idea is to introduce our partners to the Blockbuster brand."

Sonic also plans to offer Blockbuster movies on the Apple platform, streaming movies from Mac computers to iPhones and iPod Touch players. Lewis said that was part of the reason Blockbuster chose to partner with CinemaNow.

Blockbuster is looking at ways to combine the new download offerings with its existing Blockbuster DVD-by-mail subscription service, but rights issues will make it difficult, Lewis said. The retailer offers digital movies as permanent downloads or as video-on-demand rentals but doesn't have licensing rights to offer those films on a subscription basis. Premium TV channels Starz, HBO and others have exclusive licensing deals with the major studios to offer video-on-demand movies on a subscription basis for the first decade or so after a film's release, severely limiting which movies can be offered by digital subscription.

"Our customers want first-run movies," Lewis said. "It gets tricky in the subscription world. We're looking at different subscription models, different things to try to interconnect our offerings as much as possible."

Netflix offers its digital service to subscribers for free as part of their DVD subscription plan. Because of that, it doesn't have rights to stream many new release films, though it has partly gotten around the issue by signing a deal with Starz to stream newer films for which the movie channel has the rights.

Blockbuster's service is likely to land on some of the same devices that Netflix and Amazon Video On Demand are already on. Netflix offers its service on Xbox 360 consoles, TiVo HD boxes, LG Blu-ray players, TVs and the Roku player. Amazon is on TiVos, Blu-ray players, TVs and the Roku player.

Sonic and Blockbuster are betting on the Blockbuster brand to set them apart.

"The brand matters a lot in a very fragmented brand movie space. More consumers will look to us as a navigator, as a trusted partner in making sure all of this works," Lewis said.

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Sonic takes on Apple with CinemaNow purchase
-UPDATE: Plans to embed movie download service in PCs, phones, set-tops

By Jennifer Netherby (and Paul Sweeting)
-Video Business, November 19, 2009

NOV. 19 | In a move that will pit it directly against Apple iTunes on digital movies, Sonic Solutions said today it is acquiring Internet movie service CinemaNow.

Sonic will pay $3 million for CinemaNow in an all-cash transaction, execs said during a Wednesday afternoon conference call with analysts. That is significantly less than the more than $40 million the movie company has raised in venture funding from Lionsgate, Cisco, Echostar, Menlo Ventures and others since its launch a decade earlier.

Last year, Blockbuster acquired CinemaNow competitor Movielink for the bargain price of $6.6 million. Both companies have struggled to grow the download business, which has yet to take off with consumers. Apple iTunes dominates the market, largely due to the iPod.

Sonic chief financial officer Paul Norris said CinemaNow's business isn't growing, though the company expects that to change. CinemaNow generates roughly $1 million in quarterly revenue but is not yet profitable.

Sonic plans to aggressively expand the number of devices that CinemaNow's service is embedded in, envisioning a movie service available on everything from PCs to Blu-ray Disc players to mobile phones to virtually any other device that plays video, all using Sonic software and technology for seamless playback.

"There's an opportunity there to be a real viable alternative to Apple in the download space," Sonic executive VP of strategy Mark Ely said. "If you want to download movies or download TV shows, Apple has a whole soup to nuts solution. The only problem is you have to have Apple software to make it all work."

CinemaNow was one of the first Internet movie services to launch, originally formed by Trimark in 1999, before the film company was acquired by Lionsgate.

The movie service offers more than 6,000 movies through deals with every major studio. Sonic president and CEO David Habiger said during the conference call that the company hopes to double the number of movies available by next year.

Sonic will combine CinemaNow with its Qflix division to form a Premium Content Group, headed by Ely. CinemaNow president David Cook will stay on, as will other key members. Sonic also will maintain CinemaNow's Marina Del Rey, Calif., offices.

CinemaNow had already been repositioning itself from being a pure Web site service into a movie service embedded on a number of devices, including Archos digital devices and TiVo digital video recorders.

Sonic expects through its partnerships with consumer electronics companies to greatly increase the number of devices on which CinemaNow is embedded. Sonic believes having content also will make CinemaNow a more compelling partner for consumer electronics and device manufacturers in search of an easy solution to deliver movies and video to consumers.

Sonic partnered with CinemaNow earlier this year to include CinemaNow movies as an embedded service with Dell's Qflix DVD burning drives. Sonic is trying to make its Qflix technology, which burns movies with CSS copy protection, the standard DVD burning format. So far, CinemaNow offers only 100 or so movies as burnable downloads, but the company expects to make the full CinemaNow library available for DVD burning.

Sonic had been considering starting its own movie service to feed its Qflix technology but started eyeing CinemaNow after partnering with the download service for the Dell drives, said Jim Taylor, senior VP and general manager of Sonic's advanced technology group.

Going forward, the company plans to integrate CinemaNow into Qflix even more so that it's offered as one-click shopping, Ely said.

Sonic had signed a deal with Movielink last year to offer download-to-burn movies before the site was acquired by Blockbuster. Taylor said Sonic is still open to working with Blockbuster, but he acknowledged that Blockbuster might not be interested in continuing given Sonic's ownership of CinemaNow.

Ely said he hoped Sonic's ownership of CinemaNow wouldn't prevent it from continuing to work with companies in the digital movie space.

Earlier DVDTOWN News (from Aug 2008)...
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