The announcement came in the
midst of a rough year for both Blockbuster and the rental industry at
large: Movie Gallery -- the second largest movie rental chain in the
U.S. and owner of Hollywood video -- announced in February that it
would be filing for Chapter 11 bankruptcy and closing all of its U.S. locations, citing the "economic and competitive realities" video rental industry faced. Blockbuster also declared that it would be closing nearly 1,000 stores in 2010 in an effort to shift its focus more toward digital streaming to mobile devices. Despite a 7 percent boost in Blockbuster stocks
following Monday's announcement of rival Movie Gallery's closing,
Blockbuster's shares are hovering somewhere around $0.40 (The Street's Jeanine Poggi
notes that Blockbuster is close to being removed from the New York
Stock exchange) and the company remains on the brink of bankruptcy.
The new API is a huge, if belated, step in the right direction for the
ailing company. With Netflix, the reigning online rental and streaming
service, posting record earnings and revenue forecasts
last quarter, Blockbuster is playing it smart and abandoning the
classic brick-and-mortar approach to renting movies. The company's new
strategy is one of adaptation to the widespread promulgation of mobile
technology and internet-ready televisions. According to ReadWriteWeb's
Williams, Blockbuster is currently limiting the API to certain partners
-- including TiVo, Samsung, and HTC -- but may open it to other
providers in the future.
Blockbuster has been, to some
degree, responsible for its own unraveling. Williams reports that the
new API came after "two years of work to consolidate Blockbuster's
multiple channels to represent its new philosophy: 'One Customer, One
Blockbuster.'" Netflix, meanwhile, already had one foot in the digital
movie market, making it easy for the fledgling rental company to
outpace its competitors while Blockbuster sought to shore up its
unprofitable stores and extensive inventory.
The new API, however, may mark the beginning of a Blockbuster insurgency. As The Big Money's Chadwick Matlin
wrote at the end of April, "just because more and more Americans watch
movies online -- whether it be through Web-connected computers, Blu-Ray
players, or DVRs -- doesn't mean they want to stop watching the newest
movies. Netflix and Redbox can't provide those when they first come
out."
Blockbuster can offer digital downloads of new
releases, Matlin explained, because "it asks customers to pay for
digital movies the same way they rent DVDs -- a la carte. (The studios
prefer this to Netflix's come-one, come-all digital strategy.)" But
Matlin thought that Blockbuster's superior selection would be irrelevant if it didn't adopt a comprehensive digital strategy.
The new API, then,
may be a light at the end of the tunnel. The release of the iPad and
the subsequent scramble for new tablets, the increasing use of
web-ready gaming consoles (like the Xbox and Playstation 3), and the
new national fixation with versatile smartphones like the iPhone and
Motorola Droid has produced an entirely new market of outlets to which
Blockbuster can deliver its immense inventory.
The cost of renting a new release may continue to limit Blockbuster's reach; some viewers will surely prefer to stream bootlegged releases from sites like Megavideo or Wisevid, but these services often yield movies with blurry images or poor sound. Blockbuster will soon find out if paying $4 to get the newest releases streamed to a TV, phone, or e-reader is a cost consumers are willing to incur.
This article available online at:
http://www.theatlantic.com/technology/archive/2010/05/blockbuster-gone-digital/56276/
