GracefulFlavor

The strange cat-and-mouse fight between Netflix and Blockbuster for control over your movie rental habits continues.

My version of history so far: Netfix came out. Struggled for a while. Started to kick Blockbuster’s ass. Blockbuster tried to leverage its brick-and-mortar assets. Failed. Netflix continued to grow. Investors never really warmed. Blockbuster’s business started to falter as Netflix’s buzz slowly mounted. Netflix started to rock and investors responded. Blockbuster introduced Total Access program under intense pressure from its board to fix things fast, which, for the first time, effectively leveraged Blockbuster retail locations. Suddenly, Blockbuster had buzz. Netflix introduced online movie downloads. Blockbuster’s buzz took a whomping.

And that’s where we find ourselves today, but the show is far from over.

Now that Netflix has movie downloads, which — let’s be honest — is absolutely the future of the medium, Blockbuster has to answer. And it might have found it as it eyes MovieLink for acquisition.

Movie-rental giant Blockbuster Inc. is in advanced talks to acquire Movielink LLC, an online movie-downloading company owned by the major Hollywood studios, according to people familiar with the matter.

While the proposed deal is small — the price is said to be less than $50 million in cash and stock — it has important strategic implications. For Blockbuster, it represents a quick way into the online download business. Movielink has quietly peddled films online since 2002, with little success. In the past year or so, the nascent field has begun to pick up momentum, with big players like Apple Inc.’s …

Blockbuster cannot survive without making a move like this. It’s a must-do. It might not be MovieLink, but it will have to be someone, either via acquisition or strategic partnership. And it has to happen soon. Real soon.

My only request if Blockbuster pulls the trigger: don’t leave Mac users stranded like Netflix has (thus far). If Blockbuster is smart, it will not only support Macs, but also find a way to weave itself into Apple’s movie/living room strategy. To ride the coattails of Apple’s market zeitgeist would be a huge win for whoever figures out how to do it. Blockbuster, I’m looking at you.

Paul Thurrott also reports on this, and he’s correct in saying that with a little jimmying and some basic knowledge, you can have Vista and an Xbox 360 work reasonably well as a home entertainment/TV interface. The capability is there. I think it’s not terribly well-advertised and most users don’t know how to configure it and what it can really do, but it’s a good enough solution.

Apple isn’t in the market yet, but it will be with Apple TV. Apple TV needs to do what Vista + Xbox 360 does and do it better. Apple has a chance here to capitalize on Microsoft’s somewhat unpolished implementation, provided it can match Microsoft’s functionality.

This will get interesting, especially as the state of consumer movie downloads unfolds. I wonder where iTunes is going to end up in all of this?

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