Inking those deals could take a while. The studios are still considering doing video-on-demand on their own, perhaps by working with the phone companies. Furthest along are Sony (SNE) and Disney. (In fact, one Disney exec told Business Week, "We intend to be Blockbuster.") The cable companies are also starting to offer "movies-on-demand" through their digital cable lines, but they haven't cut the deals they want with the studios, either. Then there are the startups, like Intertainer, a service that has deals with Universal and Warner Brothers, along with cable networks such as A&E.
But any attempts to shut out Blockbuster will be tricky. If the studios band together, they're likely to trigger antitrust questions - and Blockbuster won't be shy about pressing complaints with regulators. The studios have said they will not form any exclusive alliances, but they still have to tread lightly, lest they subject themselves to more so-called negative leverage. "If they really push video-on-demand," says Blockbuster's Raskopf of the studios, "they know video retailers won't just sit by. We'll promote the heck out of rental."
No question, the video-rental business' future is uncertain. Even Antioco says he has no idea what Blockbuster stores will look like in 10 years, but he's sure they'll still be around. Some people, he and his colleagues reason, won't want to pay for broadband and other tech services needed for video-on-demand. And many folks are perfectly happy with their VCRs and DVD players.
Still, the chain is planning for the day when it needs to hawk more than movies. Blockbuster already sells satellite dishes; this summer, it will start stocking RadioShack (RSH) products like DVD players. In the next few years, it's likely to announce more deals with players that would have been seen as enemies in the past: A movie downloading service with TiVo (TIVO), for instance, is a possibility. Because it doesn't know who will dominate video-on-demand, Blockbuster claims it is open to everyone. "[We] stand for watching movies at home," says Antioco. "Regardless of how the movie is delivered to the house, Blockbuster can play a role."
So just when will people get to spend even more time at home? For the last decade, Tom Adams, who heads Adams Media Research, has been skeptical about video-on-demand; recently he concluded that the new technology really is on the way. The costs are coming down, he says, though he predicts it will be five to 10 years before a significant business emerges. Adams also believes Blockbuster's eulogists have ignored "the whole history of media." Video rentals didn't eliminate movie theaters. And the studios can protect rentals by releasing movies for video-on-demand only after they are released in theaters and video outlets. Until the timing of these "windows" changes, the rental business is unlikely to take a serious hit.
Indeed, Blockbuster is looking healthier. Its stock has gone up this year, to a high of about $15 in February, compared with $8 at the end of 2000. Viacom announced a few weeks ago that it is dropping plans to spin off the chain because its business has picked up. (It's worth noting that this is hardly the climate to spin off Blockbuster anyway, and Viacom never planned to do it before the chain's stock topped $20.) Blockbuster should watch out for complacency, though. As its own experience shows, predicting the future course of technology is a loser's game. Blockbuster has a hairy relationship with the studios to manage and, in NetFlix, an aggressive competitor in DVD rentals.
If some of Blockbuster's customers on a Saturday night are any guide, video-on-demand has some appeal. When told what the future might bring, they were only too happy to think that going to a Blockbuster store would become a thing of the past. "That would be fabulous," said one woman as she complained about not finding a copy of The Philadelphia Story. "We'd never leave our house." Blockbuster needs to make sure that, somehow, it's right there with her, on the couch.
