Deal allows video chain to exit tech business

Movielink got $150 million from studios to build a download service that was supposed to transform digital delivery. Now Blockbuster, the vidtail chain that picked it up at a fire-sale price little more than a year ago, has abandoned the technology all together.

On Wednesday, the chain inked a deal with rival CinemaNow that calls for the latter to supply technological support for Blockbuster’s digital storefront. Both companies will pool their digital libraries under the joint service, to be called Blockbuster Powered by CinemaNow. It is expected to launch in the second quarter.

The alliance allows Blockbuster to exit the technology business, and CinemaNow to draft off Blockbuster’s stronger brand. Although CinemaNow was founded 10 years ago, and was backed by $40 million from Lionsgate and venture capital firms, it has little awareness. Lionsgate sold the company to Sonic Solutions in November for a paltry $3 million, less than half the $6.6 million Blockbuster forked over for Movielink a year earlier.

Kevin Lewis, Blockbuster senior VP of digital entertainment, views the latest alliance less an outgrowth of either service’s failings than a sign that the download biz is maturing.

“When we bought Movielink a little over a year ago, it was a way for us to jumpstart our digital business,” Lewis said.

He notes that there are three parts to the Movielink biz — content deals with studios, the digital storefront, and technological support. Blockbuster, which already absorbed the Movielink Website into its main online presence, will continue to handle studio deals and store functions.

“Now we can look to our partner to do the heavy lifting in the middle,” he said.

Both companies hope their alliance will help them compete against rival services from companies such as Netflix and Amazon. Blockbuster offers newer movies than Netflix due to the vagaries of release windows. Download rentals became available in the traditional video on demand window, but Netflix is hampered by the fact that feevee channels have exclusives to certain pics. To get around that limitation, Netflix recently inked a deal with Starz to stream newer pics to which it has the rights.

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