Blockbuster buys Movielink as way into online movie business

Posted by Chris

August 9, 2007

Movie rental company Blockbuster has purchased online downloading service Movielink for somewhere in the $50 million range. Movielinks’s operations will not immediately be integrated into Blockbuster’s online offerings all at once, but features will be brought over as deemed appropriate. In the meantime Movielink will continue to operate as an independent site.

Movielink has distribution deals with all five of the major studios; MGM, Universal, Warner Bros., Sony and Paramount. Blockbuster initially tried to buy the site last year for $70 million but was turned down. Netflix, Blockbuster’s primary competitor in the DVD-by-mail market, started rolling out their “Watch it Now” service, delivering streaming movies online, earlier this year.

The purchase of Movielink, which has never achieved the adoption some thought it would, signals more than a little desperation on the part of Blockbuster. Despite having the backing of the studios from the get-go it has watched Netflix, Amazon, Wal-Mart and iTunes gain higher prominence. Blockbuster is pretty much admitting they’ve been unable (unwilling?) to develop a home-grown service and so shelled out a bunch of cash (which they don’t have) to buy their way into the game.

This announcement comes just shortly after Blockbuster announced they were considering opening smaller urban locations that would just stock new releases, since that’s where the majority of their income comes from, at least in regards to their bricks-and-mortar stores.