Jennifer Aniston - Movies & Other Works - "Derailed"

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Blockbuster, Weinsteins reach exclusive deal
The video store chain will be the sole renter of movies made by the ex-Disney executives.
By Claire Hoffman, Times Staff Writer
November 16, 2006

Video store giant Blockbuster Inc., struggling to regain its footing amid online competition and DVD sales by big retail chains, will be the exclusive renter of movies made by the Weinstein Co. under a deal announced Wednesday.

The partnership ï¿½ set to begin in January ï¿½ is the first of its kind in the movie rental market and appears to be another in a series of attempts by Blockbuster to stave off online DVD rental giant Netflix Inc., which controls about 80% of the Internet-based rental market.

Under the four-year deal, the two companies will share in the revenue from rentals from the independent studio. The companies said that Blockbuster would pay an unspecified percentage of the box-office revenue for the right to rent each Weinstein DVD as a way to keep it out of rival hands. Analysts speculated that the percentage could reach 25% or more.

Blockbuster for several years has had in place a rental revenue-sharing system, with studios getting around 25% to 30%, according to industry executives familiar with the arrangement.

Among the titles Blockbuster will rent exclusively are the upcoming films "Bobby," a movie about the hours before Sen. Robert F. Kennedy's assassination, and "Shut Up & Sing," a documentary about the Dixie Chicks.

"For two movie enthusiasts like us, breaking down the wall between the studio and the consumers is just intoxicating," said Harvey Weinstein, who runs the company with his brother, Bob.

Blockbuster is betting that the Weinsteins, who have released 21 films in 13 months at their new company, will again produce the kind of acclaimed films and hits they had at Walt Disney-owned Miramax Films. Some of their successes include Oscar winners "The English Patient" and "Shakespeare in Love," and the "Scary Movie" and "Scream" franchises.

Blockbuster Chief Executive John Antioco said that whereas in the past the chain might have bought 100 copies of a film such as the recently released DVD of the Jennifer Aniston movie "Derailed," it would now buy 200 copies, possibly show clips in the store of the movie being made and display posters and cut-outs.

"There are people who've dabbled with exclusive content but this is the biggest thing that anyone has done," Antioco said. He would not comment on similar deals that might be in the works for Blockbuster.

The deal does not include the sale of DVDs, which is the biggest part of the market. Studios can reap about $12.50 per DVD sold. Some industry executives also questioned how the deal's exclusivity could be maintained because video renters might be able to obtain the DVDs from third parties

In recent years, Dallas-based Blockbuster, once a dominant force in home video, has suffered as more consumers have chosen to buy DVDs rather than renting them. Stores such as Wal-Mart, Target and Best Buy have made selling discounted DVDs a major part of their business. In the third quarter, Blockbuster lost $24.7 million on a 3% decline in revenue to $1.33 billion.

Although Blockbuster is still a major force with 5,000 stores and 30 million customers, it has had difficulty challenging Netflix's hold on the online video rental market.

Netflix has close to 6 million subscribers, while Blockbuster has less than 2 million online subscribers. Netflix declined to comment on the deal.

Michael Pachter, an analyst with Wedbush Morgan Securities, speculated that the arrangement could be a prototype for similar deals as rental companies try to elbow out each other.

Blockbuster shares gained 12 cents, or 2.5%, to $4.85. Netflix shares rose 66 cents, or 2.3%, to $29.75.