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UPDATE 2-Best Buy plans movie download service with Sonic

Tue Nov 3, 2009 1:30pm EST

Stocks

   

* Best Buy to launch video download service

* Sonic shares rise 16 percent (Adds stock activity, background)

NEW YORK, Nov 3 (Reuters) - Best Buy Co Inc (BBY.N) plans to start an online service that allows consumers to buy, rent and download movies and television shows, the electronics retailer said on Tuesday.

The system, based on Sonic Solutions' (SNIC.O) Roxio CinemaNow service, would be built into devices sold at its stores, including television sets, portable media players, computers, mobile phones and other devices from a variety of manufacturers.

Sonic Solutions shares jumped 16.6 percent on Tuesday after the announcement of the deal, which could accelerate the usage of the CinemaNow system for distributing video and media to electronic devices.

Under the terms of a multiyear agreement, Best Buy will license Roxio CinemaNow technology and acquired warrants enabling it to purchase shares of Sonic Solutions common stock.

Best Buy expects to provide access to thousands of new movies, independent films, and older catalog movies, with some new titles available on the same day as the comparable DVD goes on sale. The company did not give the name of the service, or when it would launch.

CinemaNow, an online movie pioneer, has provided similar services to others, such as computer maker Dell Inc (DELL.O) and movie rental company Blockbuster Inc (BBI.N).

The service could strengthen Best Buy's ability to compete with a established online media destinations, including Amazon.com Inc (AMZN.O) and Apple Inc's (AAPL.O) iTunes store.

"Our relationship with Sonic Solutions allows Best Buy to quickly establish a strong position in the digital delivery of video entertainment," Brian Dunn, chief executive of Best Buy, said in a statement.

Best Buy bought digital music service Napster Inc about a year ago in an effort to compete with Apple's dominant iTunes service.

The shares of Sonic Solutions, which acquired CinemaNow late in 2008, jumped 91 cents to $6.15 on Tuesday afternoon on Nasdaq. Best Buy shares made narrow gains, rising 27 cents, to $39.16 on the New York Stock Exchange. (Reporting by Franklin Paul; editing by Gerald E. McCormick and Andre Grenon)



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