Blockbuster Preparing for Introduction of On-Demand Video Rentals

Blockbuster (http://www.blockbuster.com) announced last July that they will be providing on-demand movies delivered over broadband connections beginning next year. To create the streaming platform for delivery, Blockbuster has teamed up with Enron Broadband Services ( http://www.enron.net) and nCUBE Corp (http://www.nCUBE.com).

In order to avoid the piracy issue, the movies will be delivered encrypted over Enron's private fiber optic network. nCUBE will provide the streaming media appliances, software applications and nABLE management system necessary for the on-demand deployment of the movies, as well as VCR-like controls for the viewer. According to nCUBE, their hypercube-based architecture will provide a unique level of scalability to insure the availability of all titles to all subscribers at all times.

The program is expected to hit test markets in the 3rd quarter of this year, and will potentially roll out to the major markets mid-2001. Blockbuster has not yet announced what set-top box manufacturer they will be working with; however, this will be a crucial component of the system. According to Blockbuster spokesman Randy Hargrove, the consumer will either need to outright purchase the box at an estimated cost of $200-300, or lease it for a few dollars a month. They are conducting market research to determine which option will be more popular.

Blockbuster is currently focusing their test marketing on homes that already have DSL service. They are not ruling out the option of adopting their set-top box platform to be satellite and cable enabled; however, these options will occur after the first introduction.

The movies that will be available over Blockbuster's on-demand network will be those in the Pay-per-view window. Typically, movies are released into theaters first. The movies are then available for video rental and airplane viewing, with pay-per-view releases occurring 60-days after the video is released. Therefore, viewers will not be able to request the latest releases; however, they will be able to access Blockbuster's entire archive library. Blockbuster is currently in negotiations with the major movie studios to negotiate the digital rights to distribute movies on-demand.

"Over the past couple of years this technology has been too cost prohibitive. But, we feel that if we move now we will be 12-18 months ahead of any national competitor," stated Hargove.