Media Wonk

Link This | Email this | Comments (0)

Providence uploads 'New' Tube, Blockbuster downloads Movielink - August 9, 2007

A pair of deals this week put stunningly different valuations on Internet-delivered video.

On Wednesday evening, video rental chain Blockbuster said it acquired Movielink, a paid-download service backed by five major studios. Terms of the deal were not disclosed but a source told Reuters the price was "substantially below" the $50 million price point the two companies were rumored to be discussing in March.

On Thursday, the New York Times, reported that Providence Equity Partners is investing $100 million in the YouTube-knockoff being planned by News Corp. and NBC/Universal, in exchange for a 10% ownership stake in the company. That puts a valuation on the as-yet unnamed new venture of $1 billion.

That's quite a rich valuation for a service with no web site, no users, no revenue and no name. Movielink may not exactly be burning up the wires but it has at least sold a couple of downloads. It also has clear rights to about 3,000 movie titles, including from NBC/Universal, compared to an unknown number for NBC/News Corp.

Why the disparity in valuations?

Perhaps Providence knows something about what NBC/News Corp. is planning that hasn't been made public yet, because there's nothing in what's been made public that says, "Worth $1 billion."

Although NBC and News Corp. say the new web service will accept user-generated video, a la YouTube, it will primarily serve to showcase Universal and Fox movies and TV shows on a secure platform. That's fine, but it doesn't add up to $1 billion.

Many of the titles available on the new service, moreover, are already available elsewhere on the Internet, including through Walmart.com, Amazon's Unbox service and CinemaNow, among others, so there's no exclusivity to boost the new venture's valuation.

Full-length movie downloads, moreover, are yet to prove a significant money-maker for the studios, as evidenced by the declining price for Movielink. Not only is Blockbuster apparently paying less than the $50 million the parties discussed a few months ago. The $50 million price point was itself substantially lower than the $70 million Blockbuster reportedly offered last year.

If anything, Blockbuster seems better positioned to leverage its new asset than a start-up, now matter how well financed. Blockbuster already has nearly 3 million online subscribers through its Total Access plan and can combine downloads with other products and services to increase their value to customers.

Fox and Universal, in contrast, are essentially going into competition with their existing retail and distribution customers, an arrangement that risks destroying value as much as it promises to add it.

That's not to say they can't succeed. But a billion dollars? I must be missing something.


[Deals & Dealmakers]  [Platforms & Formats]  [Streams & Downloads]   LEAVE A COMMENT