Blockbuster/Enron Entertainment-On-Demand Deal Falls Apart

Both Blockbuster and Enron Broadband Services announced last week that they have terminated the exclusive services agreement the companies launched only three months ago (see previous story). In spite of the setback, both companies claim that they will continue to develop "entertainment-on-demand" (EOD) services independently.

Regarding the the four-city trial of the Blockbuster/Enron EOD service currently being conducted in Seattle, WA, Portland, OR, American Fork, UT, and New York City, both companies state that they anticipate "the test will proceed as planned" to the end of the trial. Blockbuster's John Antioco says that his company "continues to believe EOD will eventually become a commercial reality and that Blockbuster will have a formidable presence in this arena. However, we also believe there will be multiple technologies that make this service available in the home. Based on this, our plan is to remain technologically agnostic and open to all sorts of alliances."

Enron says it has developed a global, end-to-end platform to deliver a wide variety of on-demand entertainment to the television audience, including movies, games, television programming, and music. The company adds that, in spite of the dissolved deal with Blockbuster, it will continue to expand its EOD technology by developing direct relationships with multiple content providers and broadband distribution providers.

Enron's Kenneth D. Rice explains his company's view of the split, saying that "the exclusive relationship has not yielded the quantity and quality of movies needed to drive demand for this new on-demand service. We validated our ability to deliver content on-demand through the trial, and now Enron wants to take our service to the next level by adding content and subscribers on an accelerated basis."

About the problems with the Enron deal, Blockbuster's Karen Raskopf states that "there were technology and security issues that were of concern to us—it all boils down to confidence. We lost confidence in Enron as a partner in that regard." Raskopf adds that "video-on-demand (VOD) is not a commercial reality today."

Blockbuster says it will continue to focus on VOD as well as existing growth channels for home entertainment, including satellite, pay-per-view and other near video-on-demand (NVOD) services, as well as DVD rental. The company announced last month that it would be introducing a RadioShack store-within-a-store concept inside its locations, a move intended to help turn Blockbuster stores into full-service home entertainment destinations. The company also recently entered into a digital-streaming agreement with Universal Pictures, which is added to agreements already in place with MGM, Artisan, Trimark, and Lion's Gate studios.