Good Idea! Now find a better one.

Blockbuster has over 8500 corporate and franchise stores in 28 countries. What if they ran fiber from one of those locations to every home and apartment building within a 1/4 of a mile?

Now, before you shoot me down as crazy, know that I agree with you; this is a little nuts. But bear with me here, I’m only asking What If?

Unlike Netflix and Amazon, Blockbuster has a physical presence in many neighborhoods. And unlike Best Buy and Walmart, Blockbuster’s small stores frequently translate to being close to peoples homes or apartment buildings - especially in cities where a blockbuster may well be in the first floor retail space of a high rise condo building.

Conventional wisdom says that If Blockbuster is going to compete with Netflix head on, the weight of 8500 locations will slow it down. Even if they use their locations as distribution points, the core of Netflix is distribution whereas Blockbuster, according to their SEC filings, is wrestling with the overlap between online and retail rental, currently they smooth it out by providing free retail rentals with online subscriptions.

If Blockbuster wants to compete with Amazon and Walmart on price, 8500 small locations can be a hindrance versus the logistical might of Amazon’s warehouses and Walmart’s fleet of trucks and buying power.

So, given that the retail rental business is slowly contracting, Blockbuster’s same store sales were down 2.5% for Q3 of this year versus last year, and assuming that Blockbuster wants to differentiate themselves beyond an online/retail movie and game rental company, what could they do?

Who wants to run what to my house?

They could run fiber from their store to your home, condo or apartment and do digital rental and sales of video content. They could create a private high-bandwidth network for delivering movies, seasons of TV shows, games, anything they would otherwise rent or sell.

Now, running a dataline to a home or building is not new. Selling or renting video “on demand” is not new. And these areas are rife with competition: AT&T, Comcast, iTunes and MovieLink to name a few - So why should Blockbuster attempt to do anything in that marketplace?

Because they can leverage their local presence and local workforce to create products and services that no competitor can easily or quickly duplicate. Now what that service could be is anyone’s guess, but just for laughs, here’s mine:

Bandwidth is the Bait, Baby

There are two elements to running fiber from the store to nearby homes that Blockbuster could use to make an invaluable service: Free bandwidth and ala-cart selection.

Having the fiber line in your home or apartment and viewing whatever free content Blockbuster could make available would be no charge…ever. Whereas every home receives free over-the-air broadcasts, Blockbuster would provide some free over-fiber content. It’s a simple value add for homes and apartment buildings near a Blockbuster location.

And if and when people elect to purchase or rent movies they can receive them much more quickly through much fatter, better provisioned pipes. No competition with web browsing, peer-to-peer and youtube webtraffic. Short, clean dedicated Blockbuster lines from the store to the home.

Blockbuster could even do a modified version of the DVD by mail service by offering a subscription to unlimited movie rentals 3, 5 or 10 at a time. When you’ve “checked out” your 3 movies, you can’t view another until you release one of the 3 you already have. The next movie would come up instantly, something Netflix simply cannot match.

And what most differentiates this from current (and near future) versions of Comcast’s onDemand is that you can choose to spend anything from $0 up to as much as you want per month. No $50-$80/month commitments just to get the option of watching shows when you choose.

In other words, Blockbuster could circumvent the current regulatory debate about forcing the cable companies to offer per-channel ala-cart pricing by leveraging their local presence to provide superior per-show services.

And how do you watch the content given that you can’t jam a fiber line in the back of your TV? Call TiVo. They could integrate such a service very nicely. And while your at it, call Microsoft about linking in with their Media Center PC’s and their XBox too.

Perhaps the strongest element of this idea is that Blockbuster’s revenue would still flow through its physical locations - good for the franchisees - and those locations would be used to provide a service that would be difficult to duplicate without purchasing a lot of real estate.

So, Crazy or Crazy Awesome? I’m not sure. But I know it’s at least crazy.

P.S. There is the question of how to get all the content to the individual Blockbuster stores. There are two options which can be used simultaneously. The first is a high bandwidth business line pulling down content all day to be cached locally. The second has much higher bandwidth: send a truck full of hard drives packed with movies and TV shows.

Tags: Blockbuster, fiber, fttm, Netflix, Comcast, onDemand