Can Microsoft Save Blockbuster? No, Probably Not

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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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