Blockbuster in talks to buy Movielink: source

LOS ANGELES (Reuters) - Blockbuster Inc.BBI.N is in talks to buy movie download service Movielink for under $50 million in cash and stock, a source familiar with the situation said on Thursday.

A Blockbuster store is seen in this undated file photo. Blockbuster Inc. is in talks to buy movie download service Movielink, including long-term contracts with Hollywood's major studios to supply films and TV shows, for under $50 million in cash and stock, a source familiar with the situation said on Thursday. REUTERS/ Files

The proposed deal includes long-term contracts with major Hollywood studios to supply films and TV shows and would bring Movielink’s technical and management teams to Blockbuster, the source said, adding that it is still in negotiations.

Blockbuster declined comment. Movielink was not immediately available for comment.

The market for legal movie downloads is still small, with a handful of competitors including Movielink, Vongo and CinemaNow offering a fraction of the 60,000 titles available on DVD, but a Movielink deal would heighten the competition between Blockbuster and rival Netflix Inc.NFLX.O.

Blockbuster already has a stake in CinemaNow, while Netflix launched a 1,000-title streaming video service in January.

Blockbuster Chairman and Chief Executive John Antioco said this week that the No. 1 U.S. movie rental company aimed to offer consumers a “triple play” by providing video rentals at its stores, by mail and as online downloads.

Revenue from downloaded videos grew from $11 million in 2005 to $111 million last year, but the figure pales in comparison to the $25 billion in DVD and video consumption in 2006, according to Adams Media Research.

Technology is still a major issue, with companies scrambling to find ways to quickly move high-quality films over the Internet into consumers’ computers, a process which can take hours.

Meanwhile, high-definition DVDs are entering the market, raising the bar for quality standards.

Movielink’s rental prices range from 99 cents to $4.99 and purchase prices from $8.99 to $25.99. Rentals can be stored for up to 30 days but must be viewed within 24 hours of initial playing.

Movielink is a joint venture of Metro-Goldwyn-Mayer Studios, Viacom Inc.'s VIA.N Paramount Pictures, Sony Corp.'s 6758.T Sony Pictures Entertainment, Time Warner Inc.'s TWX.N Warner Bros., and Universal Studios, which is operated by NBC Universal, a unit of General Electric Co GE.N.

Movielink was the first major download service to offer legal download-to-burn DVD service for use in personal computers and plans to offer a limited selection of download-to-burn for standard DVD players in about six months.

Shares of Blockbuster were down 3 cents at $6.61 on the New York Stock Exchange, while Netflix was up 7 cents at $22.60 on Nasdaq.