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Best Buy Inc. (NYSE: BBY) has become a leader in DVD sales in the last half-decade, but the largest consumer electronics retailer in the U.S. may see that the future of the movie rental business is in downloading -- not discs.
Netflix Inc. (NASDAQ: NFLX) has been a pioneer in this space, as the largest DVD mail-order rental firm has begun embedding its software in Blu-ray players, set-top boxes, and other devices to stream digital content over the internet -- no disc needed. Best Buy apparently wants a little piece of that action.
Roxio's CinemaNow online movie rental service bills itself as the "#1 movie download service" -- and is a direct competitor to Netflix. Although Best Buy sells quite a few Blu-ray disc players with Netflix's technology built-in, the retailer has announced a partnership with CinemaNow to offer digital movie downloads to customers buying internet-enabled devices like televisions, computers, and even wireless phones.
So, Best Buy is "private labeling" the CinemaNow service in a way here to try and capture those customers who visit its stores but who are reducing their DVD purchases and Blu-ray disc purchases (which still are quite low anywhere). Could CinemaNow -- which already partners with Blockbuster Inc. (NYSE: BBI) -- become Netflix's largest competitor instead of Blockbuster or $1 DVD kiosk chain Redbox? From the number of partnerships it's seeing, that may be the road it is headed down.
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