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Blockbusters aim: Make it a DSL night

Blockbuster Entertainment continues to sign deals to help ensure that the brand it has built up in the bricks-and-mortar world will have a place in the digital world.

Later this year, the video-rental giant will roll out a branded VOD service over DSL with the help of Enron Broadband Services (the two companies agreed on a 20-year, exclusive deal to deliver the Blockbuster entertainment service via the Enron Intelligent Network) and a number of DSL providers. The DSL-based video-on-demand service will offer consumers the ability to choose from among 400 to 500 movies and have the movie delivered to a set-top box on their television via DSL.

"A couple of years ago, we changed our business model to include revenue sharing and more copies of movies in our stores, and this is an extension of that strategy," says Steve Pantelick, Blockbuster senior vice president of strategic planning.

Before the video chain begins signing on customers, it needs to sign on the movie studios. But its status helps: Pantelick says that Blockbuster cuts big checks to Hollywood studios every week. "We've spent some time with the studios, and they see the merits of what we're doing, so it's just a matter of wrapping up discussions."

MGM Home Entertainment says it's discussing its involvement in an initial two-city test, and, while there's no official deal, "we're excited about the potential," says David Bishop, the unit's president.

The Blockbuster deal with Enron isn't a big surprise.

"This is all about the digital revolution, and that the bricks-and-mortar that Blockbuster has from coast to coast will become less important," says Joe Boyle, vice president of corporate communications for cable PPV and VOD provider iNDemand. "With the recent developments in cable, we now have a way to capture all the money that's been spent in video stores, and Blockbuster sees that and is trying to protect the turf. But it might be too late."

The move is the latest by a company looking to extend its brand beyond the video-rental store. Blockbuster already is working with TiVo to develop and deploy a VOD-like service that will enable TiVo subscribers to obtain a selection of movies for viewing through their TiVo receivers. It also has a multiyear deal with DirecTV to offer PPV to DirecTV customers.

The initial VOD plan enlists telco distributors, including SBC Communications, Verizon (formerly Bell Atlantic and GTE), Qwest, Covad and others, to distribute the movies in several undisclosed markets. A major part of the initiative is that Blockbuster, reciprocally, will sell the DSL service out of its stores, with the DSL provider handling installation and customer service.

"The telcos face a major competitive issue in trying to differentiate their offerings from cable," says Pantelick. "So there's a tremendous motivation to make this work."

Blockbuster partnered with Enron, because Enron has the fiber backbone that can deliver digital content across the country. "The content from the studios will be encoded and stored at a couple of major data centers around the U.S. and then, as needed, streamed to the edge servers that will be in most cities," Pantelick explains. "And then it will be streamed initially over DSL to the home and then to the TV set."