Can Microsoft Save Blockbuster? No, Probably Not

Things don’t look so good for Blockbuster. The company’s stock has been in a free fall over the past 5 years, and has seen especially sharp declines over the past few months. Rental revenue has been down quarter after quarter, and according to Compete, their Total Access program is barely competing with chief rival Netflix.

But if you saw any of the headlines recently, you might think Blockbuster is on a roll. Once a slumbering, lumbering giant, over the past week the company has reversed course and made some key moves in an effort to catch up to the competition, including launching a set top box (just in time for the holidays), and announcing that they are working with Microsoft to deploy video content to multiple screens using the Live Mesh framework (our coverage). Are things starting to look up for the Texas-based company?

Those are definitely both key developments for Blockbuster in their quest to remain relevant, but it is likely too little, too late. On paper, Blockbuster’s 2wire MediaPoint set top box competes favorably with the competition: they have less total content than Netflix, but more new releases, the progressive playback technology will look good to people with slower web connections, and the a la carte pricing might appeal to casual renters. But Netflix has their streaming service on way more devices. Tivo, Xbox 360, Blu-ray and DVD players from Samsung and LG — Netflix integration turns these into multi-function devices that will trump the MediaPoint for many (most?) consumers.

Integrating with Microsoft’s Live Mesh might eventually yield some neat applications — such as the ability to pause a rented movie on one TV and continue watching it later on another TV, or mobile device, at the same point in the film. But the problem for Blockbuster is that if Mesh is a success, we see no reason that Netflix won’t also be using it.

After all, Netflix is also a Microsoft partner — they stream movies to the Xbox 360, as we said, and their live streaming service uses Silverlight. It wouldn’t make sense for Microsoft to form an exclusive partnership with Blockbuster at the expense of one of their other high profile partners.

Essentially, Blockbuster is still going to be playing catch up with more agile competitors like Netflix, Apple, and Amazon as more people shift to downloading their movies rather than renting them on disc.

However, whereas Microsoft won’t save Blockbuster, Blockbuster will be good for Microsoft. Microsoft has been able to push its Silverlight technology out onto 25% of web connected computers in just under 2 years thanks almost exclusively to high profile corporate deployments, including one at Blockbuster. By leaning on their enterprise partners, Microsoft can likely do the same thing with Mesh and push it out to consumers. Whether or not Blockbuster’s usage of Mesh is a positive for the movie rental company, it will almost certainly provide a great demo of the technology’s capabilities for Microsoft.

Even though the Blockbuster-Microsoft partnership made news today, it was actually announced about a month ago at Microsoft’s Professional Developer Conference, where Mesh applications under development at Blockbuster and the BBC were demoed on stage. Microsoft provided us with a video of the Blockbuster app demo, which can be viewed here.

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  • Comment Guy

    Download set top boxes and download portable players ( ie Blockbuster, Apple TV, VUDU, Hulu, PS3 ) are a thing of the past, only to be replaced by the technology used by service providers such as MyTVPAL ( http://www.mytvpal.com ) and Netflix ( http://www.netflix.com ).

    Service providers like MyTVPAL offer 1080p instant blu-ray streaming video on demand and live tv over PC Player, set top box, and I think they will have a portable device out soon.

    Keep in mind also that P2P is on the way out because it uses to much bandwidth, both up and down, and is unstable. I’m refering to service providers such as VUDU ( a one trick pony ) and Joost, who latest foray into portable video on demand on the itouch / iphone is frezing, buffering, and providing a horrible user experience even on my 6mbps connection.

    Streaming video is a great addition for live tv an video on demand, but at the end of the day only those technology companies like Matrixstream ( http://www.matrixstream.com ) will be able to support the best quality over the best effort public internet when doing a triple play ( set top box, PC Player, and portable device ) because currently where Netflix requires 8mbps for 720p streaming, MyTVPAL can support 720p streaming a 3mbps and 1080p blu-ray streaming at 6mbps.

    Keep the above in mind when considering the average person today in the United States and Canada has between 1.5 – 3.0Mbps. So While MyTVPAL can service the majority of broadband users today in the United States and Canada in both 720p and 1080p today it will be years before Netflix can service a fraction of the broadband population in high definition instant video streaming.

    At the end of the Day service providers such as Netflix and Blockbuster will have evolve to provide a service like MyTVPAL or suffer the consequences of not providing low bandwidth, instant playing, 1080p blu-ray high definition platform that we’ve come to expect from MyTVPAL ( http://www.mytvpal.com ) on PC Player, set top box, and soon I would imagine, portable player.

  • joshmarthaller

    You didn’t mention the competition Blockbuster has from Mcdonalds’ Redbox. I think large video stores need to offer the same 24 hour video vending that Redbox is. I’ve heard from a lot of people Redbox is not hurting video rental stores, but I beg to differ. I’ve waited in line at a Red box for 15 minutes.
    The prices and convenience of Red Box can not be matched by even Netflix for new releases.

  • Jasen

    I also don’t see the point since Netflix On-Demand has been out for a while, Netflix is on XBox Live, and has set-top box manufacturer support…