Blockbuster Labels Viacom-Led Network Participation A 'Rumor'
Company Says It's Exploring Many Digital Transformation Options
By Linda Moss -- Multichannel News, 4/29/2008 6:12:00 AM
Blockbuster, reported to be in talks to become a partner in a new Viacom-led premium TV service, Tuesday characterized the speculation as “rumors” and said it is “exploring lots of options.”
Both The Wall Street Journal and The New York Post reported Tuesday that Blockbuster is negotiating to acquire a stake in the network and on-demand that service that Viacom’s Paramount Studios, Metro-Goldwyn-Mayer Studios and Lionsgate are looking to launch next year.
Blockbuster, which was once part of Viacom, has been searching for a new-media play, and would be seeking digital rights to movies as part of its investment in the unnamed service, according to both published reports.
Blockbuster, which is in the midst of acquiring Circuit City for more than $1 billion, issued a statement Tuesday when asked about the reports that it is in talks to invest in the Viacom-led premium network.
“We are busy transforming Blockbuster into a multi-platform provider of convenient access to media content,” Blockbuster spokesperson Karen Raskopf said. “To that end, we're exploring lots of options, so it's not surprising there are rumors out there.”
Viacom couldn’t be reached for comment.
Pali Research analyst Rich Greenfield had issued a report Monday that handicapped what company might become a fourth partner in the new premium channel, and he had listed Blockbuster as “unlikely” to be involved.
“Blockbuster is even farther behind Netflix in trying to develop a digital strategy,” he wrote. “Similar to Netflix, it is very hard to imagine a Blockbuster-branded digital cable/VOD/broadband channel offering unlimited access to recently released movies from only three studios. Consumers also expect to find all major studio/independent movies at Blockbuster.”
Greenfield also noted that Blockbuster “has restrictive debt covenants and is in the process of trying to buy Circuit City, decreasing the likelihood that they are about to fund hundreds of millions of dollars in annual fees for a new pay TV/broadband movie service.”
Overall, Greenfield wrote that he was surprised that the announcement of the new service last week did not name a fourth partner.
“We find it very strange that this fourth ‘mystery’ partner was not part of the original three studio announcement, yet they appear to hold the key to the network’s distribution and are supposedly going to be responsible for subsidizing hundreds of millions of dollars annually that would normally be paid by consumers (to compensate the studios for their movie output each year),” Greenfield wrote.
In his analysis, Greenfield speculated that Netflix and Google are possible candidates to partner in the Viacom-led premium service.
He characterized as “unlikely” candidates to be the fourth partner as not only Blockbuster but Amazon, Comcast, Time Warner Cable, Sony, Echostar and Microsoft.
And Greenfield wrote that it would be “nearly impossible” for DirecTV and Apple to join in the Viacom premium channel venture.
As for the telcos, namely Verizon and AT&T, Greenfield wrote in a note Tuesday, “It is very difficult to understand how either (or even both collectively) could justify spending a few hundred million dollars annually on a movie channel/online subscription content that only has new-release movie content from three of three of the weaker Hollywood studios.”
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