Blockbuster announced yesterday that it was acquiring Movielink, an Internet download company. The Wall Street Journal said the price was under $50 million.

Blockbuster is trying to compete with NetFlix a rival online DVD rental company, which also launched an online movie rental service in January 2007.

Although NetFlix’s movie downloads hasn’t received much fanfare, that may be because it got off to a slow start after being offered to just a few NetFlix subscribers. Still, NetFlix at least had an online movie service, while Blockbuster did not. Rather than build, Blockbuster bought into the game.

Another rival in the movie download business is Amazon, which has its Unbox service. Customers can rent or purchase movies and have them delivered to your computer. Amazon also has a deal with Tivo to deliver movies to their subscribers so they can watch on their TV sets.

One blogger says that Blockbuster can pull ahead of NetFlix in movie downloads if it caters to the ignored Mac market, including Apple’s AppleTV system:

“My only request if Blockbuster pulls the trigger: don’t leave Mac users stranded like Netflix has (thus far). If Blockbuster is smart, it will not only support Macs, but also find a way to weave itself into Apple’s movie/living room strategy. To ride the coattails of Apple’s market zeitgeist would be a huge win for whoever figures out how to do it. Blockbuster, I’m looking at you.”

None of the three services (Amazon, Blockbuster or NetFlix) have DVD or HD quality movies, so these are strictly for those who want speedy access to a small number of movies. Most of the movies on these services are for new releases and a select number of classics or older movies. They’ve all been slow in offering a wide selection of back catalogs.

However, CNet said that the acquisition gives Blockbuster an larger online movie presence: “Movielink owns the rights to more than 3,000 titles, making it the Web’s largest digital-movie library.”

The back catalogs from movie studios is really where the money is, according to proponents of the Long Tail. The Long Tail, first proposed by Wired editor in chief Chris Anderson, says that:

“Businesses with distribution power can sell a greater volume of otherwise hard to find items at small volumes than of popular items at large volumes.” (Thanks Wikipedia for the succinctness of that description!)

Movelink was started in 2002 by some of the biggest movie studios in Hollywood including MGM, Sony, Universal and Paramount. But things didn’t go too well. Video wasn’t as popular back then, and neither was broadband. Plus it was spending way too much money for an Internet start-up.

Bonus: Read the original Long Tail article from Wired magazine here.

[Via ZatzNotFunny, WebProNews and Engadget]

Technorati Tags: Blockbuster, NetFlix, Amazon, Movielink, Internet video, video on demand