VOD venture voided

Enron pulls out of Blockbuster partnership

Blockbuster’s inability to secure video-on-demand rights to movies from most of the major studios has apparently cost the retailer its much-touted joint venture with utility giant Enron Corp.

In a statement released minutes after the close of the stock market Friday, Enron Broadband Services chairman and CEO Kenneth D. Rice said, “The exclusive relationship (with Blockbuster) has not yielded the quantity and quality of movies needed to drive demand for this exciting new on-demand service.”

Blockbuster vowed to come back with another VOD service of its own, and Enron said it has already had preliminary negotiations with studios about striking deals for the service on its own.

After months of negotiations, Blockbuster had attracted only two studios to provide movies to its video-on-demand delivery service, which is being tested in four markets. One of those deals came last month with Universal. The other was with MGM.

The retailer had hoped the partnership would convince Wall Street that the company had a viable strategy to become a player in the electronic delivery of movies; many analysts believe electronic delivery will be the undoing of traditional video retailers.

Blockbuster called Universal Studios Home Video Friday afternoon to assure the studio that the vidtailer would migrate its newly signed non-exclusive VOD deal with Universal to a new VOD system.

“They said they have another plan,” said Universal Studios Home Video president Craig Kornblau. But Blockbuster was not ready to reveal the nature of that plan, telling Kornblau that it would come back to him shortly with details.

Kornblau said his company has had no discussions with Enron.

A spokeswoman for Enron said the company has already had preliminary discussions with the studios, which she characterized as “very positive.” Enron hopes to roll its system out beyond four cities this year, pending sufficient product, which could include game and sports programming.

Although several studios have licensed their product on a non-exclusive basis to multiple VOD services, most were reluctant to work with Blockbuster for fear of giving even more leverage to the dominant market leader in packaged video.

Some also said that having to pay two partners made the economics of the Blockbuster/Enron service unattractive.

Revisiting Enron

Warner Home Video president Warren Lieberfarb said there is “no reason not to look at” the Enron service more seriously now that Blockbuster is out of the equation.

“The reason they didn’t get the movies was that there were too many participants with their finger in the distribution channel pie between the studio content provider and the consumer,” Lieberfarb said. “The license fees were unacceptable vis-a-vis other VOD delivery systems.”

Blockbuster chairman and CEO John Antioco said in a statement, “We continue to believe VOD will eventually become a commercial reality and that Blockbuster will have a formidable presence in this arena. However, we also believe there will be multiple technologies that make this service available in the home. Based on this, our plan … is to remain technology agnostic and open to all sorts of alliances.”

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