Switched On: Blockbuster box boxes blocks to bust

Each week Ross Rubin contributes Switched On, a column about consumer technology.

January 2009 will mark the first anniversary of Apple's switch in positioning Apple TV from something that transferred computer-based content to a PC to a video vending machine that allowed direct ordering over broadband. In doing so and cutting a few dollars off the price, the company became the leader in a small category of products exclusively focused on displaying networked content. However, it's been far from alone there. The installed bases of the PlayStation 3 and Xbox 360, which offer similar functionality, far exceed those of Apple's little box. Recently the long-delayed SlingCatcher came out of the gate, which -- with a little finagling on a PC screen-- can display virtually any video content available via broadband on a television using its SlingProjector technology.

Vudu, a startup that had launched a similar a la carte device, has pushed deeper into the custom installation channel as of late. And CinemaNow, which had partnered with HP on its MediaSmart televisions and standalone device, was recently purchased for $3 million by Sonic Solutions. The acquiring company likely has designs on using the service to support its at-home DVD burning technology QFlix.

And on the low-end from Roku -- the roots of which were as a developer of PC-stereo bridging products -- has come a nondescript box that streams movies from Netflix for $99. A year before MovieBeam finally had its plug pulled, its receiver device was available for even less than that.

But with such a long track record of tough breaks for dedicated devices and low adoption of online movie purchases and rentals questions remain about demand for a dedicated device that delivers movies via broadband. Undaunted, Blockbuster and 2Wire - heretofore known more as a provider of residential gateway networking - have teamed in a manner similar to Netflix and Roku to deliver MediaPoint.

Starting at the same price as the Roku Media Player, it has at least one significant technical difference. Instead of streaming movies, it uses progressive downloading to display them, which should provide for higher quality playback when bandwidth is limited. As on the Roku device, Wi-Fi is also supported. MediaPoint may also be one of the first products of its kind to download movies onto flash memory; the set-top has enough storage to hold about five standard-definition movies. Movies can be viewed up to 30 days after they are purchased and have the standard unreasonable 24-hour completion window once they are started.

Unlike the Roku device, there is no subscription required to use the Netflix device. And Blockbuster is also offering a twist on promotion, throwing 25 movie rentals in with a new device, making the MediaPoint "free" for a $4/movie rental price. MoviePoint will initially offer about 2,500 movies -- only about a quarter of those offered by CinemaNow -- and a small fraction of what one can access via Netflix rentals of physical disks. After the initial 25, movies will start at $1.99 and Blockbuster claims that it should receive movies for rental faster than competitors, usually 30 days after they leave the theater.

Blockbuster also notes that its digital rental option will soon be available in Blu-ray players. As Netflix acknowledged with its announcement on digital distribution, a dedicated device is but one -- and should be among the lowest volume -- of a wide range of devices on which the company's "Watch Instantly" service is available, including some Blu-ray players, the Xbox 360, PCs and Macs, and in theory any device that supports Microsoft's Silverlight technology.

Since it does not require a subscription, the Blockbuster service has the potential to offer convenience to a wider range of consumers and fill in catalog gaps as the Blu-ray catalog grows. On the other hand, those who would ordinarily be the most aggressive adopters of such a service are more likely to become Netflix subscribers. If Blockbuster can make good on its release window advantage promise, this could come down to a battle between timeliness and value

Neither dedicated set-top will have a tremendous bearing on the fortunes of their movie-renting service providers for the foreseeable future. For now, though, Blockbuster's late entrance into living room electronics seems squeezed between those who would opt for a subscription business model and those who would avoid a standalone box model.

Ross Rubin is director of industry analysis for consumer technology at market research and analysis firm The NPD Group. Views expressed in Switched On are his own.