Technologizer

Is copying Redbox’s strategy a way for Blockbuster to survive? I’m beginning to think so.

Earlier this week, I rented from a Redbox for the first time. I have walked by these kiosks in our area for well over a year now, and in recent months they’ve become quite numerous — Redbox lists 19 of them within 10 miles of my house alone. The allure of a movie for just a buck a night is just too good of a deal to pass up.

While entering my selections into the kiosk — Star Trek and Angels & Demons — I couldn’t help but wonder why Blockbuster wasn’t doing the same thing. Heck, it costs you $5 to rent these same movies at their stores no matter whether you return them the next day or however long your local store allows the movies to be out.

It’s for this reason why Blockbuster is struggling. In this new world, it no longer is worthwhile to have a storefront because of the overhead costs. Think about it. Netflix has considerably less infrastructure costs because all its business is online and only needs shipping warehouses to serve its customers; Redbox has even less overhead since it essentially freeloads off the locations where its kiosks sit.

There’s just no way that the company can be on a level playing field with its competitors because of this. Tuesday’s news of the company partnering with NCR to place 200 “Blockbuster Express” kiosks in Duane Reade Drugstores across New York City could arguably be Blockbuster’s path to salvation.

When the company is done, about 2,500 kiosks will be up and running around the country. Each will hold about 900 DVDs, which will give the movie retailer an opportunity to offer a wider selection than that of Redbox, which can only hold about 500 discs.

As the company moves to this system, it will allow Blockbuster to continue closing down its retail locations, which have become its Achilles heel. This will stink for those employees that could soon find themselves out of a job, but its just a reality of our modern digital economy.

It’s going to be very interesting to see how Redbox responds. Blockbuster eliminated its competition by simply being able to offer a broader selection of movies than its smaller competitors, and now the company that arguably pioneered the movie rental kiosk finds itself in the same situation.

One thing it has so far as an advantage over Blockbuster is scale — some 17,500 kiosks are located in McDonald’s, Wal Marts, Walgreens, and other grocery and drug stores around the country. Blockbuster will need to quickly ramp up to legitimately compete.

Select Motorola phones will gain the ability to stream “thousands” of movies to their devices from Blockbuster’s OnDemand video service under terms of a deal announced on Tuesday. An OnDemand application would be preloaded onto these phones from the factory.

Details are rather scant, and it is unclear at this time exactly which models would gain the new feature. Consumers would have the choice to either rent or purchase titles outright from Blockbuster.

The deal is potentially a very positive one for the movie retailer, considering the bruising battle with Netflix that left it in poor financial shape and near to bankruptcy. If successful, it would add a much-needed revenue stream and put the company ahead of competitors in a still largely-untapped market here in the US.

Blockbuster had made it a priority earlier this year to expand its reach to as many devices as possible. It appears that the service would be available regardless of cellular provider as it is a Motorola-offered feature.

The death knell may be ringing for Blockbuster. Today the video-rental giant admitted that if it cannot complete the financing deals that it is currently working on, there is a good chance the company may be forced to shut its doors. While the company last week said it was in the process of getting a $250 million revolving loan from creditors, that may be in jeopardy.

Why? The loan apparently has some conditions to it, and Blockbuster is now not sure it can meet them. Even worse, whether the loan goes through are not, it is not even sure that would be enough to save the company.

During my days at BetaNews, I always seemed to get the Netflix vs. Blockbuster stories and the pricing war and war of words that went on between the two. I can tell you from what I wrote during that period that Blockbuster’s financial problems stem from that fight.

Neither side was willing to lay off, and both put out lots of money to one up the other through promotions, advertising, and the like. Even more, the pricing war that went on between the two cut into each company’s revenues. While Netflix is still going, it too was bruised financially by the fight.

(It’s probably fair to say Netflix’s lack of overhead is why its wounds were less deep.)

I sure hope that Blockbuster can find a way out of this mess, but it could be a victim of the changing face of how we consume media just like the newspaper industry. I guess time will tell.

Blockbuster, the video rental giant that’s trying to figure out a role for itself in a world of digital downloads, has struck a deal that should help: Its Blockbuster OnDemand service will be offered on TiVo DVRs. TiVo owners will be able to rent and buy movies from a selection of 5,000 to 10,000 titles (including new major studio releases, but nothing from Disney), with prices typically ranging from $4 to $10.

Blockbuster will also start selling TiVos in its stores, helping its customers make the inevitable transition from driving to the video store to choosing movies via remote control.

The deal adds yet another video provider to TiVo’s already well-rounded list: The TiVo HD in my living room already offers Netflix Watch Instantly, Amazon Video on Demand, Jaman, Disney releases via CinemaNow, and more. Each one’s a bit different in its scope and focus–Netflix, for instance, offers all-you-can-watch pricing but doesn’t have major new releases; Amazon has a ton of stuff, but each item is priced separately; Jaman specializes in international films.

The experience is a little disjointed–each provider has a separate interface, so it’s a little like visiting a mall with multiple video stores rather than one giant store–and TiVo needs more high-definition content. (It should get that once Amazon launches HD titles.) But TiVo’s doing a good job of giving folks reasons to buy a box that go beyond recording cable TV–which is essential to its future, since it’s competing with renting a cheap DVR from your cable company.

As I said in the piece on Internet TV boxes I just wrote for PC World, I’d much rather have one multi-purpose box in my living room than a bunch of specialty ones. There’s no one Ultimate Universal Box yet, but TiVo’s doing enough to keep me from buying and finding space for something like a Vudu or Roku box. But if you know of anyone who makes a cable-ready DVR/DVD/media streamer that also plays Wii games and can replace a Slingbox, please lemme know…