Blockbuster Busts Out Cable Deals

Struggling video rental firm Blockbuster Inc. is reaching into the cable biz in a big way after striking a strategic alliance with two top 10 U.S. MSOs -- Suddenlink Communications and Mediacom Communications Corp. .

Initially, that alliance will focus on branding and marketing, but the companies have left the door open to the MSOs integrating Blockbuster's by-mail and broadband-based video-on-demand (VoD) movie distribution.

Under phase one of the partnership, starting this month in Suddenlink's Charleston, W. Va., system, and Mediacom's property in Des Moines, Iowa, the MSOs will rechristen parts of their respective VoD services under the Blockbuster brand. (See Blockbuster Teams With Two MSOs.)

The MSOs will also promote their voice, video, and Internet services to Blockbuster's customer base via in-store kiosks and in-store promos. Each says it will extend the agreement beyond its initial market, but neither is saying when.

Later, Avail-TVN, one of Mediacom's and Suddenlink's VoD content distribution partners, will help Blockbuster bundle other "multichannel capabilities" that will give Suddenlink and Mediacom customers access to Blockbuster DVD and Blu-ray titles they can't now get.

Timing of that phase is still to be decided, but Blockbuster senior VP of digital entertainment Kevin Lewis says his company and the MSOs will try to develop joint offerings that could include seamless cable access to Blockbuster's snail mail and broadband rental and sales platforms.

"People have put cable and Blockbuster in two separate silos. This [MSO deal] is the first time you start to see those silos begin to collapse," Lewis says.

Blockbuster's broadband-powered movie download service, which boasts about 10,000 titles, can be reached on the Web or via broadband-connected Samsung Corp. TVs and Blu-ray players, Vizio high-definition TVs, and TiVo Inc. (Nasdaq: TIVO) DVRs. On the mobile handset side, Motorola Inc. (NYSE: MOT) has signed as the exclusive provider of Blockbuster VoD titles. (See Blockbuster on TiVo, Moto Teams With Blockbuster, Blockbuster Win Could Open Doors for Rovi, and Blockbuster Nabs Third Screen With Moto Partnership.)

If Mediacom and Suddenlink join those ranks, it will mark the latest in a string of recent deals that find cable operators embracing the world of Web-sourced video.

For example, Evolution Broadband LLC and RCN Corp. already have agreements in place with TiVo that will give cable subscribers access to an MSO's traditional VoD lineup plus some broadband-based video delivered through TiVo's content partners. (See RCN Makes TiVo Its Dominant DVR and TiVo Covers Its Cable Bases .)

Mediacom is the seventh-largest U.S. MSO, with about 1.3 million subscribers, followed by No. 8 Suddenlink, with roughly 1.26 million, according to National Cable & Telecommunications Association (NCTA) data. So, this deal gives Blockbuster some cable industry footing.

But Blockbuster may need more MSOs to step up, as it battles debt issues coupled with increased competitive pressure from the likes of Netflix Inc. (Nasdaq: NFLX) and Redbox Automated Retail LLC. Blockbuster recently revealed that it may have to shut down as many as 960 retail stores by the end of next year.

— Jeff Baumgartner, Site Editor, Cable Digital News

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