Sky in rental pact with Blockbuster

By PETER GRIFFIN

Sky TV has formed a pact with video rental chain Blockbuster that is likely to smooth Sky's debut in the online DVD rental business.

Sky launched its DVD rental service over the weekend with a revamped website as the new public face of DVD Unlimited, the Nelson start-up Sky purchased earlier this month for an undisclosed sum.

Members pay $38 a month and, in return, are mailed up to three DVDs at a time. They place their movie orders through the website. The pay TV operator's move is designed to put it on an even-footing with the video rental chains who get movie releases before Sky is allowed to broadcast them via its pay TV channels.

That was likely to raise the hackles of the video rental chains, but Blockbuster looks set to cash in on the arrangement, which will see it procure DVDs to build the library for Sky's online service.

Its master franchisee, Steve Dods, said the deal would be "mutually beneficial" to both companies.

Other video rental chains say the online model has its place but cannot replace the experience of popping up to the video store to browse.

United Video general manager Lindsay Hall said relying on the mail system took the spontaneity out of choosing movies. "For country people, it's excellent but for the average renter, they're within three to five kilometres of a store anyway." United Video had no plans to enter the online DVD rental business. Sky has at least two local opponents here, including Fatso.co.nz which is backed by the likes of businessmen Stephen Tindall and Bryan Mogridge.

Fatso defiantly labelled Sky's entry into the market as an endorsement of its business model, which is borrowed from US operator Netflix.

Hall said the movie rental market had grown 20 per cent each year for the past three years, with much of the growth put down to the popularity of DVDs.

Sky's annual meeting, to be held in Auckland tomorrow, is likely to be a calm affair for chief executive John Fellet. The company turned a profit of $35.3 million for the year to June 30 with increased subscriber numbers, revenue and viewership.