In May, Roku introduced a small $99 set-top box designed specifically to play movies from the Netflix service on your television.
On Tuesday, Blockbuster struck back with a set-top box of its own.
Blockbuster’s device comes with a potentially more attractive pricing plan than the Roku: The cost is $99, but that includes 25 movie downloads. (Additional movies will cost as much as $3.99 apiece.)
While Netflix and Blockbuster compete for DVD rentals, their approach to Internet movies is very different. Netflix includes access to an unlimited number of streamed films as part of its membership plans that cost at least $9 a month. However, the selection is limited and generally includes movies that are several years old.
Blockbuster already offers movie rentals online through the Movielink service it bought from a group of studios last year. New releases typically cost $3.99 to watch over a 24-hour period. The company has films from most of the major studios about a month after they are released on DVD.
For people who want an easy way to rent recent movies online, the Blockbuster device seems like an easy, low-risk deal: rent 25 movies at $2.50 each with no extra expense or continuing obligation. It is certainly better than the other pay-per-view boxes, Vudu and Apple TV, which typically offer the same movies but cost more than $200 upfront. Of course, Apple offers a more robust set of features and a link to the iTunes ecosystem. (Comparing this deal with the Netflix-Roku proposition is more complex because the pricing schemes, features and catalog of films are all different.)
Jim Keyes, the chief executive of Blockbuster, said he had very limited expectations for the set-top box, which is only available for purchase from Blockbuster.com. In the first year, he expected to sell tens of thousands of units. (Roku has sold hundreds of thousands of its boxes since its May release.)
Blockbuster, Mr. Keyes says, is offering customers many ways to rent and buy movies: vending machines, subscriptions by mail and digital downloads. But more than 90 percent of the movies it distributes are still through stores. Over the next five years, he said, DVDs and Blu-ray discs rented in stores will continue to be the bulk of Blockbuster’s business.
“Digital downloads are not going to dominate the industry tomorrow,” Mr. Keyes said, noting the limited capacity of Internet connections in the United States. (I wrote recently about how the market in South Korea, which has much faster Internet service, is shifting quickly to movie downloads.)
Mr. Keyes added that the growing interest in high-definition video, which can take five or six times as long to download as standard video, will make Internet movies even less attractive.
“You can drive to our local store and rent a Blu-ray disc in less time than it will take you to download a movie in high-def,” he said.
Since Blu-ray is taking off rather slowly, I asked Mr. Keyes why he believed that high-definition would really be a gating factor. He said that from what the sees, the propagation of high-definition television sets and television signals is driving an increasing demand for high-definition movies.
“It’s like driving in a 1998 vehicle after you have driven a 2008 vehicle with all the new features,” he said. “You don’t want to go back.” Mr Keyes added that he believed that consumers would be willing to pay a premium to buy and rent high-definition movies.
Blockbuster is using a set-top box made by 2Wire, a company that mainly provides equipment to telephone companies to offer high-speed Internet service over phone wires. The box was designed so that phone companies and other Internet providers can offer Internet-delivered video to television screens in an inexpensive way. (Telcos will pay about $100 for the box.)
For Blockbuster, the box is intended to download movies rather than stream them, as the Roku box does for Netflix. That offers a somewhat higher video quality. And 2Wire uses technology that can start playing a film before it completes downloading it. On very fast connections, the movie will start playing almost instantly. On slower connections, there could be a delay of five minutes or longer. The box has 8 gigabytes of flash memory, enough to store a few movies. That gives it more capabilities than the Roku box, but it doesn’t have a hard drive like the AppleTV box.
Blockbuster is considering adding other programming options to its version of the set-top box. And it is making its movie rentals available through other companies, yet to be announced, that will also deploy the 2Wire box. Like Netflix, Blockbuster also plans to put its movie rental service on other Internet-connected devices like Blu-ray players and high-end televisions.
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