Blockbuster (BBI) gets into the download business

Blockbuster (NYSE:BBI) is buying (subscription required) film download service Movielink. It's about time. The service is owned by several Hollywood studios.

While every company from Wal-Mart (NYSE: WMT) to Amazon (NASDAQ: AMZN) has a movie download service, the largest retailer of premium video content does not. That appears to have been an important missed opportunity. According to The Wall Street Journal, the price was less than $20 million, which is another reason investors should wonder why the movie rental company would take so long.

Blockbuster has one huge disadvantage getting into the download business. That it that it is very late to the party. Cable and telecom fiber-to-the-home products already offer video on demand with large libraries. Huge DVD retailers, especially Wal-Mart, are already in the business, and digital stores, especially Apple (NASDAQ: AAPL) iTunes, have already blown past a million video downloads.

But, Blockbuster has one massive advantage -- its customer lists. The video rental firm has data on all of the people who rent movies at its stores and all of its DVD-through-the-mail project which competes with NetFlix (NASDAQ: NFLX).

Blockbusters is almost certainly too late getting into the download business but, if it is very aggressive marketing the product to it millions of existing customers, it might just start to rebuild its revenues.

Douglas A. McIntyre is a partner at 24/7 Wall St.