November 20, 2007, 12:00 AM

Coming soon to a PC near you: Blockbuster movie downloads

Blockbuster expects to begin offering movie downloads to PCs sometime in the first or second quarter, CEO James W. Keyes recently told Wall St. analysts. The downloads will be available on Blockbuster.com once the company has integrated Movelink.com

Mark Brohan

Research Director

Blockbuster Inc. expects to begin offering movie downloads to personal computers sometime in the first or second quarter, CEO James W. Keyes recently told Wall St. analysts.

The movie downloads will be available on Blockbuster.com once the company has finished integrating Movelink.com, which Blockbuster acquired in August for $6.6 million. “Our plan is to fully integrate the Movielink site into Blockbuster.com with enhanced functionality and an improved user interface,” Keyes told analysts on the company’s third quarter conference call. “We expect improvements in the Movielink integration will be completed by the first quarter of next year.”

Blockbuster completed its acquisition of Movielink in October. For the first six months of the year, Movielink, which was formed in 2001 by Sony Pictures Digital Entertainment Group, posted a net loss of $10.1 million on revenue of $1.9 million. In 2006, Movielink, which was 80% owned by subsidiaries of Metro-Goldwyn-Mayer Studios Inc., Paramount Pictures Corp., Universal Studios and Warner Bros., recorded a net loss of $22 million on revenue of $4 million, compared with a net loss of $31.1 million on sales of $3.2 million in 2005. Since 2002, the amount of contributed capital by the major studios has amounted to $148 million, according to a recent report Blockbuster filed with the Securities and Exchange Commission.

Blockbuster, No. 51 in the Internet Retailer Top 500 Guide, acquired Movielink and its business of selling the digital distribution of movies over an open access Internet protocol system or through broadband networks to keep pace with Netflix Inc., No. 18 in the Internet Retailer Top 500 Guide. A phased rollout of the Netflix instant watching feature began in January and by July had generated five million views, Netflix says.

Blockbuster is counting on Movielink as a key part of its new strategy to transform the chain from a move rental retailer into a broader content distribution and merchandising company. “We are developing a digital capability,” Keyes told analysts. “This will allow us on the digital side to keep pace with the changing need for convenient access to media entertainment.”

He adds: “An important step toward that objective was our acquisition of Movielink which allows us to offer customer access to one of the largest collections of digital content now available, and to access new releases via the Internet.”

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