Online Video Gets Boost From Blockbuster Buy

JUST LAST WEEK BLOCKBUSTER ACQUIRED the MovieLink download service.
The reported purchase price was somewhere in the $20 million range,
which when all is said and done might be one of the biggest steals of
the year.

MovieLink is a service founded 5 years ago by the movie studies that
offers consumers downloadable movie rentals and/or purchases. It was
the studios' attempt to do what the major airlines did when they
launched Orbitz in 2001. Prior to the creation of Orbitz, the airlines
watched as Travelocity and Expedia were quickly scaling their business
and becoming both a competitor and a vendor. Their solution was to
join the fray and they did so successfully with the creation of
Orbitz.

Several hotel brands attempted to follow Orbitz' lead and launched
Travelweb.com in 2002. Unfortunately, with many millions invested, in
both infrastructure and marketing, little traction was ever achieved,
the site URL was sold off to Priceline and the venture disbanded.
MovieLink has ultimately met a similar fate to Travelweb's rather than
following in the steps of Orbitz.

MovieLink was launched in 2002 and received an estimated $100 million
in investment from its ownership group of Warner Bros, MGM, Sony
Pictures, Universal Studios and Paramount Pictures. The launch of the
business was ahead of its time in 2002, and still is today. Because
the service only achieved limited traction it was being starved of the
continuous investment it needed, while exhausting the patience of its
owners, I believe.

Online movie distribution is an area that I think yields much
potential. The future of the movie distribution business will quite
possibly involve the release of a film not only in theaters, but on
cable, online, via your iPod or your cell phone, all at the same time.
The movie distribution system will undoubtedly evolve and change from
what it is today. The main factors of this change will be independent
studios and billionaires like Mark Cuban who are funding projects with
multi-platform launch (think HDNet Movies). All it takes is an
independent director to take a chance on distributing a compelling
film and putting it on YouTube to have it watched and spread virally
by millions across the globe. This will be the ultimate catalyst for
change.

While I think it's a matter of when and not if, the when may not be
for many years. And whenever that time comes, the impact will be felt
across the advertising industry as well. Can you envision the release
of a new movie for free over the Internet that features commercial
breaks or is sponsored by a sole advertiser much like some TV programs
(i.e. "24" on Fox and "The Closer" on TNT)?

I think this is a strong possibility. We are already seeing a
grandiose shift in how distribution/content companies from the new Dow
Jones/News Corp to Comcast are leveraging their platforms. While a
free WSJ.com seems all but certain a year from now, a less certain but
not entirely impossible free or highly discounted cable service from
Comcast that relies on advertising in lieu of subscription revenue is
something that has to be considered.

This is why the MovieLink acquisition is so interesting. Blockbuster
has been gaining share and has finally become the competitor to
Netflix many thought it should have been years ago. For only $20
million, Blockbuster has now aligned itself even closer with the movie
studios, and is in a great position when it comes to distribution and
potential commercial sponsorships of movies online.