Blockbuster comes home
|
|
January 7, 2000: 3:27 p.m. ET
Deal with TiVo allows video-on-demand capability from customers’ homes
|
NEW YORK (CNNfn) - Blockbuster Inc. sealed a deal with personal television provider TiVo Inc. Friday that gives the video rental company long-awaited access to consumers via their televisions.
The agreement calls for the two companies to jointly develop and deploy a video-on-demand service that will enable TiVo subscribers to view Blockbuster movies using receivers connected to their television sets.
The companies hope to deploy the service by the end of the year, said Santo Politi, president of Blockbuster new media. There also are long-term plans to allow customers to reserve movies for pick-up at Blockbuster stores or for direct viewing through TiVo receivers.
Investors like deal
The agreement at least partially addresses Wall Street’s long-standing concern that Blockbuster (BBI), a subsidiary of media conglomerate Viacom Inc. (VIA), would quickly become outdated as a home video rental company as cable, satellite television and video-on-demand services proliferate in the American home.
Blockbuster’s stock has fallen sharply on those concerns since debuting at $15 per share in August, dropping as low as 9-3/8 in recent weeks.
The company’s stock troubles have grown so bad that CBS President Mel Karmazin reportedly is mulling the possibility of nixing Viacom’s plan to spin-off Blockbuster after CBS and Viacom complete their planned merger later this year.
However, Blockbuster shares jumped 1-1/8 to 11-1/8 on news of the deal by mid-afternoon Friday, while TiVo (TIVO) soared 12-9/16, or 33 percent, to 51.
But Politi played down any notion that the TiVo deal is some sort of saving grace for Blockbuster’s stock.
"This is not the answer to all our problems,” Politi said. "This is just the beginning of us accessing several technologies to benefit our customers. In the future, I think there is going to be a lot of different technologies to access consumers at home.”
In fact, some analysts questioned whether Blockbuster actually has the right to redistribute movies over TiVo’s system without first gaining permission from the movie distribution companies. A company spokesman was not immediately available to comment on that concern.
TiVo still in early growth stages
TiVo, whose receivers allow users to customize their television line-up, is still emerging from its development stage. As of Sept. 30, the Las Vegas-based company had only about 2,500 subscribers nationwide.
However, TiVo has allied with a number of high-profile partners, including NBC, General Motors (GM) and DirecTV, as well as several retail partners including Best Buy (BBY), Circuit City (CC), Sears, Roebuck & Co. (S) and Amazon.com (AMZN).
"The market seems to be very fond of them,” Politi said, referring to TiVo’s high market capitalization. "They have signed up a lot of very good partners . . . and market expects that [subscription] number to grow.”
Politi hopes some of that same fondness will rub off on his shares, which analysts generally believe are undervalued.
Scott Davis, an analyst with Schroder & Co., released a research report Thursday calling the recent stock falloff an "overreaction” by Wall Street, even given Blockbuster’s recent decision to lower its fourth-quarter sales estimate because of industry-wide weakness during the holidays.
"The fourth-quarter estimate reduction is an isolated event,” Davis said. "We view the current weakness [in stock price] as a strong buying opportunity.”
|
|
|
|
|
|