Blockbuster Streaming Comes To TiVo, But Service Won't Reach Many Consumers

On Tuesday, TiVo and Blockbuster announced that consumers who have a Series 2 or Series 3 TiVo unit can now rent movies from Blockbuster. The service, which was originally announced in March, went live yesterday with movies costing between $2.99 and $3.99 a piece. While the release says that "subscribers can now rent hot new release movies", I couldn't find any movies to rent that I would call "hot new releases". The "new releases" section contained movies like "Shrink", "The Last Resort", "Dance Flick" and "Battle For Terra". As of this morning, there were 658 movies available to browse and Blockbuster said that "in the coming weeks," it will expand the number of movies available and provide a "select" number of HD titles.

Frankly, I don't understand Blockbuster's strategy with TiVo. While it makes perfect sense to bring their content to the device, why launch with a service that's only half baked? One of the biggest arguments made by Blockbuster on why they have an advantage over Netflix is that they have rights to first-run movies, something Netflix does not have. But then they launch the service with no first-run movies and don't even offer anything in HD quality.

While it's good to see Blockbuster working to get content on more devices, TiVo alone won't do much for the company since according to TiVo, as of last quarter, the company had 1.6 million standalone TiVo subscribers. While TiVo doesn’t break out how many Series 1, 2 or 3 units have been sold individually, if we assume that one million of these subscribers have a Series 2 or 3 unit, Blockbuster is realistically reaching a million or less consumers. And based on adoption numbers we have seen with Netflix's streaming on the Xbox 360, about 10% of Xbox 360 owners use the Netflix service. Keep in mind, Netflix streaming is free so the adoption numbers will be higher than those who have to pay to stream a movie with Blockbuster. That puts the number of consumers who are realistically going to use the Blockbuster service on TiVo probably at around 50,000 or less. That's not a big number.

Anything Blockbuster can do to bring content to more devices will help the company and this is the first step of many. But without having "hot new releases", HD quality and a large enough consumer base, Blockbuster is still going to have trouble getting their digital media strategy to pay off.

Comments

[Davis Freeberg:]

You are missing the forest for the trees. For someone who is so up to date on the future of video, you seem to misunderstand the potential for hardware. For so long a small handful of companies have controlled tv content. Now that linear television is being challenged, strategies must change to be successful. The broadcast networks of the future won't be restricted to certain areas like cable is or have to worry about time slots because it's all on demand. Ushering in this change is a mass proliferation of devices and solutions. It may only be 1 million subscribers that Blockbuster can reach, but those are subscribers who aren't as likely to go to a video store and who wouldn't shop with Blockbuster otherwise, if they didn't go to the customer. When Netflix launched support on Blu-Ray players how many people who bought the Blu-Ray were actually customers? I'd argue a very small percentage when you look at Netflix's overall penetration rates, but each device that they partner with introduces them to another series of micro audiences able to consumer their content. Whether we're talking about the Xbox, Roku or TiVo, these devices start to add up. You can be unimpressed by Blockbuster's entry into the consumer electronic world, but don't overlook the significance of this change in strategy. They may be a year or two behind, but this sort of partnership will be what end up defines digital video.

Oct 15 10:37 AM

[Dan Rayburn:]

Combined, all of those devices add up, but not to a big number yet. In fact, it's very small.

Breakdown On The Number Of Broadband Enabled Devices Sold In The U.S
blog.streamingmedia.co...

Your basically saying this is the future, ok agreed, but you're not saying by when? It won't be two years from now. Even two years from now, the projections on how many of these devices will be sold is very small.

Oct 15 11:56 AM

[Davis Freeberg:]

That's just it, your hang up on the number of devices is preventing you from seeing the real trend that happening. Let forget a minute about when we get to the future and look at this news from the context of how we get there. On it's own, the announcement is nothing new, nothing revolutionary and as you point out only available to a small audience, but the ripple that these decisions make is very exciting. TiVo may only have a small stand alone base, but there are a lot of DVRs out there and they've clearly been in front of many trends. Online scheduling, TiVo to Go and support for online video are a few things that consumers can get, if they actively seek it out. This makes it harder for the other 25 million DVRs to continue to keep their systems closed. Maybe it means that they start experimenting with cable everywhere or approved video content like Epix, but sooner or later they will have to respond.

From the perspective of Blockbuster, the arrangement highlights their willingness to not be exclusive. Earlier their digital strategy was to build a Blockbuster only box, now they are competiting on the same platform as Netflix, Amazon and the whole internet. It may only be an early example of this, but other Blu-Ray manufactuerers and connected TV makers will look at it and say hmmm maybe we can offer multiple choices for consumers instead of just one. This is very different from the cable only model where they absolutely want to be the only provider.

What the agreement really means for consumers though, is that they can now get Blockbuster digitally without having to buy special equipment. If they own a TiVo, it's there whether they are a potential customer or not. It's like Blockbuster was able to open a new video store without the cost of rent, staffing and what not. Maybe it's only 50,000 buyers, but how much does that cost them to replicate in real life? As more and more HARDWARE devices start supporting digital video it will drive demand for streaming services. Right now, it's all experimental, but if you look at where we are in the microchip area, we'll see a handful of connected tvs come out this year, but a healthy percentage of them coming out in 2010. Eventually most TVs sold will include an internet connection and that is what's so exciting about all of this. Consumers will have these choices presented to them when they buy products that they are already consuming. It's not a revolution as much as an evolution. Blockbuster's ability to show that it's committed to competing on these platforms opens up new video stores among each partners. So what if Samsung only ends up selling a couple million Blockbuster enabled TVs, it will still be allow Blockbuster to offer content to a community that wouldn't otherwise seek them out. When does the future happen? I'd argue that this is just a glimpse but that in two years, the majority of electronic devices will be connected and those passive consumers who've been reluctant to try digital delivery will finally understand the potential.

Oct 15 12:26 PM