Blockbuster considering set-top box for movie downloads

Trips to the video rental store may be a thing of the past sooner than thought.

Netflix and Blockbuster are already offering DVD rental service by mail. Amazon.com, Microsoft's Xbox Live, and Netflix deliver movies directly to the PC. TiVo, Vudu, and Apple TV--not to mention cable and satellite companies--are doing the same for TV sets. Local independent stores notwithstanding, the only major brick-and-mortar options left for renting discs are Hollywood Video/Movie Gallery, which is close to bankruptcy, and Blockbuster.

(Credit: Blockbuster)

But The Hollywood Reporter says Blockbuster may be giving customers more reasons not to visit its stores. The rental chain is said to be making a set-top box that will allow video content to be streamed directly to a television. The announcement should come sometime later this month, according to THR

A Blockbuster spokeswoman said it is "talking to numerous companies" about ways it can provide "access to media content across multiple channels--from our stores, by mail, through kiosks, through downloading, through portable content-enabled devices--so it's not surprising that there are rumors out there."

The service would take advantage of video-on-demand technology from Movielink (which Blockbuster bought last year) that allows movie downloads from Universal Studios, Paramount, Sony Pictures, MGM, and Warner Bros.

There was no mention of price or how such a service would work in the report. But let's think about this: to compete with Apple TV or Vudu, the device would have to cost around $200, and rentals of movies and TV shows should be around $3 to $4 each, which would be slightly cheaper than rentals of new releases from Blockbuster currently. The big advantage Blockbuster would enjoy over Apple TV, Vudu, and TiVo, it seems, would be selection. Considering its longstanding relationships with the studios, it would likely have the largest library of films and TV shows to choose from. See my colleague John Falcone's excellent comparison of set-top rental boxes.

No matter the details of the how the device would work, this represents a new direction for Blockbuster and the video rental market. Money spent on DVD ownership and rentals has been decreasing steadily for the past four years, according to the Digital Entertainment Group, which tracks sales of disc media. And though there's no indication Blockbuster would eliminate its brick-and-mortar stores, a streaming video service would clearly cannibalize some of that business.

Assuming the report is spot-on, and Blockbuster attempts to make this transition to digital content, it's time to wonder how much longer physical media will be a factor for mainstream movie renters.