Blockbuster Moving In on Cables Turf

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Blockbuster Inc. and DirecTV Inc. made a major splash two weeks ago with news of a multiyear marketing alliance directed at pay-per-view and, eventually, video-on-demand services.

Yet a lot of questions remain about how this new partnership will be executed.

It remains to be seen whether Blockbuster will be able to effectively sell DirecTV dishes alongside its DVDs and videocassettes. If Blockbuster can't satisfy DirecTV's aggressive sales projections, it will be interesting to see how much the DBS service will alter its successful, 50-channel "Direct Ticket" PPV operation to complement Blockbuster.

Also, how easy will it be for Blockbuster employees to go from selling consumers a videocassette of The Sixth Sense to selling them on the advantages of watching the same movie on DirecTV a month later?

How much differentiated and appealing content will Blockbuster bring to the table, and will it generate enough incremental revenue for DirecTV to allot channels to the new alliance or to pre-empt a showing of a top studio title?

But while there are some logistical questions surrounding the deal, one thing is certain: The Blockbuster/DirecTV combination is something that should concern the cable industry.

When two of the industry's biggest competitors put their powerful brands and business plans under one roof, it provides a familiar comfort zone for consumers and opens the door for a potential migration away from cable to DBS.

And with both companies enjoying very cozy relationships with studios, a joint PPV/VOD service could conceivably yield better PPV windows than those for operators hoping to match or surpass DirecTV's PPV-revenue take.

With operators aggressively rolling out digital-PPV channels and moving toward VOD, it's important for the industry to aggressively market and promote its multichannel-PPV offerings so consumers know the true value of cable's transactional services.

But the industry is still wading slowly through the implementation of the new technology, particularly with VOD. In Demand has attempted to unify the industry's current PPV/near-VOD business under one brand, but the industry has yet to come to a consensus about which company will ultimately lead the technological, programming and marketing charge toward the ultimate "killer app" of VOD.

If it waits too long, however, cable may be left standing on the side while Blockbuster, DirecTV or another video competitor pockets the digital NVOD and VOD revenue that should be filling cable operators' coffers.

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