Monday August 10, 2009 – Antonette Goroch
No doubt in response to Netflix’s popular video-on-demand set-top box (the Netflix player by Roku), Blockbuster debuted its Internet VOD service/STB to much fanfare late last year. But after almost a year of luke-warm reviews Blockbuster has been conspicuously silent about shipments of its branded set-top boxes or customer usage, leading many to question the long-term viability of the effort.
Blockbuster would seem to be well positioned to leverage its national presence into a successful VOD brand. It has a strong existing customer base, which it has extended fairly successfully into DVD by mail (a la Netflix) over the past couple of years. It also has existing deals with major studios that theoretically could be leveraged into shorter release windows and expanded catalogs of back titles. Never mind the failed VOD experiment with the infamous Enron back in 2001 – we’ll give Blockbuster a pass on that one seeing that its business partner couldn’t be relied upon to be honest with – well – anyone.
But despite this, unofficial estimates put STB shipment levels in the tens of thousands at best, far below what many had been expecting from the product. A couple of factors could suggest why reception hasn’t been what many were hoping for. While competitors such as Netflix, VUDU and Amazon have been extending their catalogs into HD throughout the year, Blockbuster remains SD only. Further, while Blockbuster has been able to secure some new releases ahead of competitors, its overall library is smaller---particularly in regards to popular TV content. Additionally, Blockbuster only allows a 24 hour viewing time from purchase—shorter than a bricks and mortar store rental. The bottom line is that Blockbuster has had little to differentiate its service in a recently crowded slate of VOD to the set-top competitors, and the market for such a single-use set-top box is inherently small.
Indeed, now that Netflix has essentially picked the low hanging fruit of early adopters with its Roku Netflix Player, differentiation will be increasingly difficult for most of these products. That’s no doubt why most players, both hardware and content alike, are seeking to expand their presence and capabilities through cross partnerships. Roku, for instance, just announced its newest player includes support for a variety of video codecs, access to the Amazon and Netflix VOD libraries. Similarly, Blockbuster is reported to be close to a deal with Sony to offer its content library via the PlayStation 3, as well as its own player. What seems clear is that with such a crowded market place for essentially the same content, Blockbuster (and other potential VOD service providers) can no longer rely on just a strong existing brand to make headway into the burgeoning market for Internet VOD. Indeed, Blockbuster’s experience indicates it will have to raise the bar considerably---both in terms of HD content, scope of delivery and the depth of their libraries—to gain any significant marketshare at this point.
