Will Your PC Kill the Video Store?

Millions of movie fans are snapping up the latest video release without setting foot in a brick-and-mortar rental store. They do it with the help of their PCs, through online rental services that either ship or download films. But will their enthusiasm eliminate your option to find the goods at Blockbuster or Hollywood Video?

"No, no, no, not at all," says Randy Hargrove, a spokesperson for retail giant Blockbuster. Nevertheless, the company is looking at new and different ways to keep PC-savvy movie watchers turning to Blockbuster and not to Netflix, the online DVD rental service that boasted 1.3 million subscribers at the end of 2003.

This year, Blockbuster plans to launch its own online movie rental service. Besides meeting Netflix on its own turf, Blockbuster will compete with Wal-Mart.com and with smaller, specialized Web sites.

Building on Experience

This isn't the first time Blockbuster has dipped its toes into online waters. In 2002, the retailer purchased FilmCaddy.com, a relatively small Netflix competitor, in order to "better understand the online-only business model," Hargrove says. Blockbuster doesn't release financial numbers on its FilmCaddy service, but Hargrove says the company finds the results encouraging enough to justify planning a broader-scale online movie rental service.

The service will likely resemble Netflix's online-only plan, where subscribers receive and return movies through the mail. But Blockbuster plans eventually to integrate online, mail-based service with its physical stores, Hargrove adds. The company isn't likely to launch the service before 2005, but it will let customers receive movies by mail and then return them to a store.

Blockbuster hasn't yet set pricing, Hargrove says, but Blockbuster's rates should be comparable to those at Netflix, which charges $20 per month for its three-DVD plan.

With both Netflix and Wal-Mart, you submit a wish list of titles through the service's Web site. The movies come by mail, along with postage-paid envelopes to return them in. You can keep up to three movies at a time for as long as six months. As soon as you return one, the service ships you another from your list.

Wal-Mart has slightly lower prices: For slightly less than $19, you can rent three movies.

Netflix has grown quickly since its 1999 debut and expects to have almost 2.7 million subscribers by the end of this year. But rival services, including ones that offer downloadable movies in addition to DVDs by mail, are popping up.

Download DVDs

The greatest peril to Blockbuster's in-store business may not come from online DVD rental services at all, says Patti Freeman Evans, a retail analyst with Jupiter Research. Evans expects downloadable movies, currently offered by companies such as CinemaNow and Movielink, to threaten the video rental market in the future.

Both CinemaNow and Movielink market downloadable movies that you can store on your hard drive for a limited amount of time. Movielink lets you keep the movie for 30 days, but once you begin watching it, you have a 24-hour window during which you can view the movie as often as you want.

CinemaNow offers a download-to-own option for some movies, allowing you to download a permanent copy of the video that you can watch on your PC as often as you'd like. CinemaNow lets you burn copies of some movies to DVDs, too, but because the software saves the movies in Windows Media format, you can't watch them on a standard DVD player.

At present, downloads take so long--several hours, even over a broadband connection--that these services aren't likely to threaten Blockbuster's livelihood anytime soon, Freeman Evans says.

Other Technological Rivals

Right now, Blockbuster is more likely to face a rival such as On Demand, the cable service, Freeman Evans suggests.

Available from several cable companies across the country, On Demand maintains a library of movies and TV shows from which you can choose and watch selections at your convenience. Some movies are free to subscribers of certain pay channels such as HBO; others are available for 24-hour rental for a fee comparable to what a video store charges. You don't have to download the movie; you access it through your cable box, and can pause and review it as many times as you want within the rental window.

On Demand services support a level of spontaneity lacking from Netflix and similar services--even those that offer downloadable movies--according toFreeman Evans. Whereas Netflix ships movies from an updatable online list, "[g]enerally, picking a movie isn't planned that far in advance," she says.

Even downloading a movie from a service such as Movielink or CinemaNow entails delayed gratification, since the movie may take several hours to download. To address this shortcoming, Movielink's Movies in Minutes feature lets you begin watching the movie while the download is in progress. CinemaNow offers a similar service.

"Eventually, [download services] will be a win-win situation," Freeman Evans says. "You can get the movie and watch it when you want, so you can be spontaneous. And it's a very cost-effective method of delivery if it doesn't take a whole day to download."

At the moment, movie-watchers can choose the best service for their preferences or needs. CinemaNow and Movielink are great for travelers who plan ahead and want to download movies onto their laptops to take on the road. Netflix and Wal-Mart provide a physical disc. But all of these services promise no more late fees--something you can still run afoul of at your neighborhood video store.

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