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Blockbuster, Universal team for streaming video

Industry Standard

(IDG) -- Video rental chain Blockbuster (BBI) Inc. said on Tuesday it inked a deal to offer Universal Pictures films via its video on-demand service and separately said electronics retailer RadioShack (RSH) Corp. will have a presence at its stores.

Blockbuster, a subsidiary of media giant Viacom (VIA) Inc., last year teamed with Enron (ENE) Broadband Services to deliver feature films on demand through the Enron Corp. unit's Intelligent Network, which is currently in the testing phases in Seattle, Portland, Ore., and American Fork, Utah.

The deal between Universal and Blockbuster coincides with a new revenue sharing agreement between the two companies that covers new film releases being made available for rent at Blockbuster stores, the company said.

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"Access to video streaming rights with Universal underscores our goal as a company to provide quality, in-home entertainment, in whatever form our consumers want it delivered," Blockbuster Chairman and Chief Executive John Antioco said in a statement.

As part of the deal with RadioShack, which sells electronics through more than 7,100 U.S. stores and dealers, Blockbuster said it plans to introduce a RadioShack "store-within-a-store" inside its 5,000 video rental locations nationwide.

Shares of Blockbuster were down 3 cents at $13.45 on the New York Stock Exchange early on Tuesday, while RadioShack, which had closed at $39.70 on the Big Board, had not yet begun trading.

Lehman Brothers analyst Alan Rifkin said in a research note that he views the alliance as a "very" positive development. "It will open up an entirely new distribution channel for RadioShack and excellent access to Blockbuster's 48 million member accounts," he said, adding that he maintains his strong buy rating on the electronics retailer.

The deal provides a full-service home entertainment destination within each Blockbuster store, where customers can purchase home electronics, telephony services, high-speed Internet access service and connectivity technologies. All the boutiques will be staffed by RadioShack personnel.

RadioShack will pay a undisclosed licensing fee to Blockbuster for each location, and both companies will share in the cash flow and other economic benefits, they said.

"Having a retail presence in as many of the 5,000 Blockbuster stores as possible nationwide opens up a new distribution channel for RadioShack," said RadioShack Chairman and Chief Executive Leonard Roberts.

Roberts said the alliance will provide the company with access to more than 3 million Blockbuster customers each day, "including more women and young adults, while using a capital efficient way to expand our square footage and distribution network."

The two companies said they will roll out the plan in two phases, starting with 130 stores in four markets by this summer. Blockbuster and RadioShack said they planned to extend the arrangement nationwide in 2002.



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