Best Buy digital movie service powered by Sonic

DIGITAL: Retailer will promote downloads in stores

By Jennifer Netherby -- Video Business, 11/3/2009

NOV. 3 | DIGITAL: Best Buy’s move into digital movies will closely hew to the paths broken by Netflix, Blockbuster and other competitors, using a branded movie service available through Web-connected Blu-ray Disc players and other devices made by multiple manufacturers.

The retailer, which is now beginning to provide details of a partnership with Sonic Solutions that was announced in June, will rely on Sonic’s Roxio CinemaNow movie service to handle movie delivery and the technological backend for the service, saving Best Buy from having to create a digital movie service from scratch. The service will be branded under the Best Buy name, with the retailer handling all marketing and promotion.

Best Buy customers will be able to rent digital titles for between $1 and $4 while pricing for purchased titles will be determined by Best Buy but will likely be comparable to DVD sell-through prices, Sonic Solutions Chief Executive Officer Dave Habiger said on a conference call with analysts.

CinemaNow software has already been added to components such as LG Electronics and Samsung Blu-ray players and HDTVs as well as TiVo digital video recorders because of a similar agreement Sonic Solutions already has with Blockbuster, said Habiger, who estimated that most of the connectable components sold at Best Buy, including smartphones, will include the service in time for the holiday season.

Sonic Solutions executive VP of strategy Mark Ely said Best Buy’s store reach and marketing power could help “take Internet video from an early adopter category to more of a mass market phenomenon,” while Habiger said the agreement may encourage studios to make more titles available in digital form and lower the prices on them. 

Ely said as part of the deal, Best Buy will train employees on digital movies and devote space to connected set-tops and accessories, as well as spend money to educate consumers and promote the digital movie service to encourage consumers to try it out. Best Buy will pay Sonic a service fee for each electronic component carrying CinemaNow as well as a commission for each digital title rented or sold through Best Buy, said Habiger, who didn't disclose further financial details about the agreement.

The partnership is similar to one Sonic struck with Blockbuster earlier this year, which began rolling out through devices and stores in the last month. Blockbuster’s movie service, the backend of which is run by CinemaNow, is now available on TiVo and Samsung components and is set to debut on other devices in coming months.

Blockbuster said today that in the past few weeks since Blockbuster On Demand was relaunched with Sonic Solutions’ Roxio CinemaNow as a technology partner, customers are linking devices such as TiVo digital video recorders and Samsung HDTVs to their Blockbuster.com accounts at a rate 50% higher than on other CinemaNow-powered devices.

“Our alliances with Samsung and TiVo have allowed us to bring service to millions of homes across the country, and we’re delighted with how quickly consumers are recognizing the value of the Blockbuster On Demand movie service,” said Jim Keyes, CEO of Blockbuster.

The company didn’t disclose any breakdown of how the rate of rentals and purchases of Blockbuster’s digital titles have changed since the relaunch.

Best Buy has been stepping up its digital commitment in recent months. Two weeks ago, it announced a partnership to bring Netflix’s streaming movie service to its Insignia Blu-ray players.

In June, it partnered with Sonic, linking to Sonic’s CinemaNow Web site from BestBuy.com for movie downloads.

Ely called today’s announcement a “natural extension” of the partnership.

During Best Buy’s second-quarter earnings call Sept. 15, CEO Brian Dunn hinted at a major move into digital, saying, “We’ll see more digitally connected services. Over time, you will see the center of our stores evolve to the manifestation of that.”

Sonic’s Ely said in coming months, the company will make it easier for consumers who buy a movie from any Roxio CinemaNow-powered movie service to watch it through any other service it powers. For example, a customer who buys a movie through Blockbuster.com on their TiVo would be able to watch it on their Insignia Blu-ray player through Best Buy’s movie service. Habiger added that the company wouldn't rule out a subscription-based service, similar to Netflix's, in addition to its a la carte pricing.

“The goal is to make it possible for devices sold from different retailers to be completely interoperable from a consumer standpoint,” Ely said.