Blockbuster's decline can be partly blamed on the rise of online rent-by-mail services like Netflix and Gamefly. Other services, like Redbox which lets users rent DVDs at $1 a night from conveniently placed kiosks, have equally eaten away at the retail giant. Blockbuster has tried to react to these competitors, launching both online and kiosk-based rental service, but it clearly hasn't done enough to help plug the leaks in the sinking ship that is Blockbuster.

The major advantage Netflix has over Blockbuster is its online streaming capabilities. Netflix subscribers can stream a continuously expanding library of movies and TV shows directly to any of a number of devices, including the iOS devices, gaming consoles, and networked BluRay players. While Blockbuster users have the ability to swap discs in stores, the inability to stream any content has long been a thorn in the service's side.

DVDs are going away. This already happened with music. One day that vast majority of us will no longer buy physical copies of movies and keep them on a shelf. Netflix realizes this - which is exactly why they want to get out of the expensive rent-by-mail business and completely focus their efforts online with streaming content. Blockbuster, by failing to make the move to online streaming, will inevitably go down with the ship as fewer and fewer people purchase physical media.

However, until broadband speeds improve to handle full streaming at BluRay quality, there will still be lingering business for physical disc renters and sellers. Blockbuster hopes it can eventually pull itself out of bankruptcy and continue to survive for a bit longer.

The company has also confirmed that they're working on an Android app, which is likely to launch on the "select Motorola phones" Blockbuster previously hinted at when they partnered with the handset manufacturer last summer. Motorola is the maker of several popular Android-powered handsets including the Droid, Backflip, Devour, Cliq and Cliq XT, but Blockbuster won't yet confirm which of these will be able to utilize the new mobile service.

Although Blockbuster's annual report to the SEC hints at the company's financial troubles - troubles exacerbated by competitors like Netflix and the pop-up video rental kiosks from Redbox - the company has clearly not given up its will to compete. With offerings already available for PCs, Samsung Blu-ray players, Samsung TV sets and Tivos, Blockbuster's strategy going forward is attacking the mobile front with full force. In the works is an updated iPhone application, an Android application (apparently for the Motorola phones, although the company won't directly confirm this), the Windows Mobile application for the HD2 and the expectation that more carriers and manufacturers will want to partner with them once they see what the company's mobile apps can do.

Blockbuster vs Netflix: New Releases vs. Back Catalog

Where Blockbuster differs from Netflix is in its desire to forgo "streaming" in favor of downloads when it comes to their on demand options. Unlike Netflix's desktop streaming service and newly announced Silverlight-powered app for Windows Phone 7 Series devices, Blockbuster's OnDemand service for both desktop and mobile actually downloads content to whatever hardware it runs on. According to Scott Levine, Blockbuster's VP of Digital, it's not that the company is against streaming per se - it's just that streaming over 3G is more of a challenge.

Instead of dealing with the network connectivity issues brought on by overloaded wireless carriers or relegating themselves to putting out a limited "Wi-Fi only" type of application, the company's free mobile apps will actually download the movie a customer rents or purchases to the handset and protect it using DRM (digital rights management) technology.

This solution allows Blockbuster to serve new releases to their mobile customers as opposed to the "back catalog" content which is what, for the most part, Netflix's streaming service currently provides, says Levine.

No Downloads on Apple Devices, but Working On Other Solutions

However, the technology Blockbuster uses now to serve its movies to mobile devices limits what the company can offer to iPhone, iPod Touch and soon, iPad users. This is due to the fact that Apple restricts apps from saving movies to the device's hard drive, Levine explains. When asked if they had plans to work around these restrictions in order to launch an iPhone/iPad app, he would only say that the company was "exploring different options" and that they would "love to be there."

For now though, iPhone owners who use Blockbuster's mail service can manage their account with the mobile application which will soon be updated with more features. In the new release, there will be improved remote control options for queue management plus tools that help you determine Blu-ray store inventory, games store availability and the availability status for movies in your Blockbuster queue.

More Details on Devices

T-Mobile has just launched the site for the new HTC HD2 smartphone which lists the Blockbuster service among its many features. The status of which Motorola phones will include the new mobile app is still unknown but Motorola's Android lineup includes several devices running different versions of the Android OS. Both the Backflip, Cliq and Cliq XT come with Android 1.5, but only the Blackflip is upgradeable to 2.1, according to Motorola's website. The Devour runs Android 1.6 and the Droid runs 2.0. However, Verizon is pushing out the 2.1 update to the Motorola Droid starting this Thursday. 

Last November, we expressed skepticism about the kiosk plan. "The major advantage [Blockbuster] had over Netflix was the ability to offer free in-store rentals if people returned mailed videos to the store," we wrote. An in-store kiosk cuts the convenience level in half -- now that you're not getting anything mailed to you, you're forced to make a trip to the store, and there is no longer any reason for Blockbuster to offer free rentals.

Much of Blockbuster's good news was at the store level where mechandising revenue rose 19.7% over last year. But as the Motley Fool points out, in-store kiosks might hurt that revenue stream. "I thought the purpose of winning foot traffic at the store level was to grow incremental impulse-item sales," writes Rick Aristotle Munarriz. "Folks walking in to use an automated kiosk are unlikely to bother with conventional checkout lines."

What About Redbox?

While it's true that Redbox DVD rental kiosks already have 6800 locations in the US -- more than Blockbuster -- and that the company is moving toward an IPO, Blockbuster's kiosks aren't the same. Redbox works because the kiosks are placed in locations that already have a lot of retail foot traffic -- such as Wal-Mart, Walgreens, and grocery stores. Redbox inspires impulsive movie rentals and is convenient for people already out doing other errands.

Blockbuster kiosks, on the other hand, would be in places you only visit if you're planning to rent a movie already. The convenience of no late fees is also diminished when you have to leave the house and download your movie to a portable device -- which may mean less than perfect video quality when you hook your device up to a television.

The Future is in Downloads

Last fall Keyes told reporters that he expects the DVD business to be a significant part of Blockbuster's business for at least 5 years, and that the kiosks are meant as a way to transition users toward a future of digital downloads. Netflix agrees that in 5 years the DVD business will be on the decline, but Netflix is skipping the "transitional" period and moving straight to downloading movies directly to the TV.

Blockbuster is also working on a set-top box, which will put its acquisition of movie download service Movielink to use. Unfortunately for Blockbuster, they'll be a late entry to a market that is already crowded with mammoth competitors, including Amazon, Apple, Netflix, and Microsoft.

Despite some good revenue news, Blockbuster still seems like a company that's making all the wrong moves as it struggles to transition to the digital world.

Perhaps the Onion says it best though, in the following news report.

The latest company thought to be readying its own Internet TV set-top box plans is Blockbuster, according to Hollywood Reporter. The new “set-top device for streaming films directly to TV sets” could be announced as early as this month, and would utilize the company’s recent acquisition of online movie service Movielink, giving users access to over 3,000 film titles from major Hollywood studios Paramount, Sony, Universal, Warner Bros. and MGM.

BBC iPlayer lands on Wii - who said Nintendo doesn’t do media center?

A version of the BBC’s iPlayer will be made available on Nintendo’s Wii, announced the UK public broadcaster’s Future Media and Technology chief Erik Huggers during a keynote speech at the MipTV-Milia conference in Cannes. The move marks the first time the iPlayer will be available on a games console, and perhaps surprisingly, not one designed specifically to be a media center. So much for the ‘trojan horse into the living room’ strategies of Sony’s PS3 and Microsoft’s XBox 360.

Babelgum commissions feature-length environmental documentary

Internet TV platform Babelgum has always pitched itself as serving the interests of independent video producers who want to find and connect with niche audiences. By tapping into the Long Tail, the company maintains it’s possible to “find an audience that rivals or exceeds the mainstream TV audience in any local market.” However, Babelgum has now crossed a line, moving away from being purely a content distributor to also commissioning original and exclusive content of its own. Last month, the company announced plans to set up a $10+ million production fund, telling Variety that Babelgum was “transforming into a digital media studio.” The first of those commissions is thought to be a feature-length environmental documentary about the threatened Athabasca Oil Sands region in Alberta, Canada.