Downloads force Blockbuster merger

The video rental chain is set to expand into retailing DVDs, CDs and computer games. Picture / Russell Smith

In a sign of the looming decline for the traditional movie rental and music retail business, Blockbuster is merging with CD chain Sounds.

Icon Digital Entertainment - a new company owned by Blockbuster's New Zealand master franchisee Steve Dods - has bought the local management of the Blockbuster brand, the 50-store Sounds music chain and specialist gaming retailer Games Plus.

The merger will see Blockbuster stores expand into new areas, including digital downloading and retailing DVDs, CDs and computer games.

Users can now download movies, music and mobile phone ring tones over the internet, posing a threat to the traditional movie rental store and music retailer.

Dods said downloading kiosks would ensure Blockbuster could claim some of that business and would be rolled out in stores from next month.

"If people are in the music downloading space, you'd think that we should be, because we are a music retailer ... We need to take ownership of some of that space.

"When New Zealand does get into the broadband requirements for movie downloadings, we'll be able to look at positioning ourselves in that space as well."

Rival Video Ezy International is moving in a similar direction, having already said it intends to be involved in providing internet protocol TV (IPTV) once technology is available in New Zealand.

Blockbuster would retail DVDs, CDs and computer games by Christmas and install kiosks to download music and ringtones next month.

The merger strengthened the businesses because the customers were similar and the stores could "cross pollinate". Blockbuster and Sounds stores will retain their own identities.

ICON DIGITAL ENTERTAINMENT

* Blockbuster - around 40 stores nationwide - will retail DVDs, CDs and computer games by Christmas in addition to its rental operations. Kiosks to download music and ringtones set to rollout from next month.

* Sounds - around 50 stores nationwide and online retail - product range will expand and include computer games, with digital downloading capabilities also to be introduced.

* Games Plus - six stores in the upper North Island and online retail - will remain a niche retailer of computer games and DVDs.