For a company that is so far behind their competitors, I can only laugh when Blockbuster continues to talk about all of these supposed “advantages” they have in the market. Last week Blockbuster started running television commercials in two states highlighting the fact that they don’t have to wait 28 days to rent new releases. (Their commercial has since been pulled from YouTube due to copyright issues.) While that may seem like a big deal, we all know that consumers are starting to consume more movies digitally, yet Blockbuster’s supposed “28-Day Advantage” does nothing to help them with their failing digital strategy.

Last year, Blockbuster made a big deal about how consumers could now “rent hot new release movies” via their TiVo. In reality, nine months later, Blockbuster has a total of 13 movies available for streaming in HD. And the 25 movies they list under “new releases”, two-thirds of them you’ve never heard of or they average ratings of under two stars.(Some of the new releases include movies such as “Shinjuku Incident”, “Our Family Wedding”, “Percy Jackson & the Olympians”, “Greenberg”, “Ninja’s Creed”, “Stacy’s Mom”, “8: The Mormon Proposition” and others duds.)

Even one of the newer Blockbuster releases, Avatar, isn’t available for streaming in HD from Blockbuster. (If you want to get it in HD, you can via the Zune Video marketplace on the Xbox 360.) When Avatar came out, Netflix and Redbox had to wait four weeks before they could rent it, unlike Blockbuster who paid to get access to the movie right away. Yet even with Blockbuster having access to the biggest movie of the past year and Netflix having to wait, Netflix’s business has done nothing but grow. Blockbuster’s so called “advantage” over Netflix has not translated into slower growth for Netflix or Redbox or increased market share for Blockbuster.

While some have suggested that Blockbuster’s deal with Sonic Solutions will get Blockbuster installed on more devices, keep in mind that Sonic’s own numbers say that the number of CE devices carrying their stores, under both their brand and those of their partners will be, “over 3M CE devices by June of 2010″ and “nearly 30M by June of 2011“. Netflix will be on 100M devices by the end of this year.

Blockbuster digital strategy clearly isn’t getting any traction, their inventory of movies available via digital is weak and yet the company still wants to waste time and money trying to convince consumers on how they think they have an “advantage” over their competitors. Blockbuster should know by now that something is only an advantage if the customer thinks so and is willing to pay for it.

Update: Someone sent me an email asking how Blockbuster’s HD inventory compares to Amazon. Via TiVo, Amazon Video On Demand has 51 HD titles available for streaming.

Related Posts:

– Redbox’s Digital Strategy Won’t Challenge Netflix’s Streaming Service, Here’s Why

– Ten Years Later, Blockbuster Still Lacks A Digital Media Strategy

– Blockbuster Won’t Survive: CEO Says “Conservative Approach” Required For Digital

– Blockbuster Streaming Comes To TiVo, But Service Won’t Reach Many Consumers

– Platform Overload: How Many Content Platforms Can Survive On TVs And Devices?

Update: All business books are gone. Only two Windows Media books left. I have seven copies of my book "The Business of Streaming & Digital Media", which is part of the NAB Executive Technology Briefing series and two copies of "Hands-On Guide To Windows Media" to give away. This is the last batch of books I have left. If you would like a copy of either, leave your name in the comments section with a working email address and I'll reach out to you for shipping details. The books are free and will be given away to the first few readers who ask for them.

Earlier in the month, CDN provider Highwinds announced it had acquired privately held Bandcon in a cash and stock deal. While terms of the deal were not announced, the buyout includes an earn out component for Bandcon based on meeting revenue targets. In conjunction with the acquisition, the company also announced that they have hired Steve Liddell as the new President of their CDN business. I got a chance to spend some time recently with Steve Liddell and Highwinds CEO Steve Miller and got more details on the acquisition and company’s revenue growth.

For those that track the CDN market, Steve Liddell’s name will look familiar. Steve was formerly the CEO of Panther Express, (and before that worked at Level 3) where he was brought on by Panther’s investors in 2008 to sell the company, a task he accomplished with the sale of Panther Express to CDNetworks in February of last year. This time around though it’s much different for Steve as he’s not being asked to sell a company, but rather build up Highwinds’ CDN services and help grow their market share.

When Highwinds announced they had acquired Bandcon, most folks I spoke to didn’t know who Bandcon was or what they offered. While Bandcon called themselves a Content Delivery Network, they actually re-sold Limelight, Level 3 and Highwinds delivery services and the company’s primary source of revenue came from services like transit, co-location and managed hosting. Many didn’t know the Bandcon name and the company didn’t do a lot of marketing, but they has just celebrated their 10th year in the industry and were quite respected by many as smart tech guys with a nice small business. While Bandcon’s revenue numbers for 2009 were not disclosed, the company did $20.4M in revenue in 2008 and late last year, ranked 20th on the Inc. 500 Magazine, 2009 List of Fastest-Growing Private Companies in the Telecommunications category.

Highwinds themselves have been very quiet in 2010, which company CEO Steve Miller says has been primarily due to the fact that they have been focusing on the Bandcon acquisition, building out in Brazil and just completed a $35M debt refinancing. For Highwinds, acquiring Bandcon is a great fit as it doubles the size of their network to almost 4TBps, provides them with additional buying power and provides Highwinds with a new sales presence on the West Coast. In addition, with Bandcon having more than 300 customers and generating a lot of their revenue from services outside of CDN, it also enables Highwinds to help diversify their revenue, something every CDN is currently working hard to accomplish.

Speaking of revenue, with the Bandcon acquisition, Highwinds expects to do $100M in revenue for this year, with $33M in EBITDA and unlike most companies in the space, is profitable. To put that in perspective, Limelight Networks had $134M in revenue last year with $12M of that being EBITDA positive. The company is taking on 32 of Bandcon’s employees and with some additional hiring, they expect to have a head count of about 175 employees by the end of the year.

If Highwinds reaches their target goals, there will now be six companies in the industry who have a CDN offering, doing more than $100M in revenue this year. That’s not to say that all of these companies are actually doing $100M in CDN specific revenue, but you now have Akamai, AT&T, CDNetworks, Highwinds, Limelight Networks and Level 3 who are all $100M+ companies.

For Highwinds, I see the acquisition of Bandcon as an opportunity to re-launch their CDN services, create a name for themselves in the market and develop their CDN messaging of who they are and what they offer. The company now has all of the pieces they need to be successful in the market, is highly profitable and now just needs to attack the market, exposing content owners to their brand and their services.

When Bloomberg reported earlier today that Redbox was "developing an online strategy" to challenge Netflix, many seemed to think this was some kind of breaking news story. But in reality, those inside Redbox have been working on trying to develop a digital media strategy for over a year now and still face some major hurdles that will keep it from competing with Netflix anytime soon. Redbox's biggest problem is that the company has zero device penetration and can't get to a large install base anytime soon.

While many bloggers and analysts were quick to point out that Redbox could simply work with Roxio to license their platform, none of them seemed to actually do the math which shows that Roxio can't solve the device problem for Redbox. I see analysts saying things like, "Sonic technology is already in DVD players and TVs", yet they don't mention what the device penetration for Sonic is when compared to Netflix.

In a recent earnings call where Roxio spoke of device growth, the company said that the number of CE devices carrying their stores, under both their brand and those of their partners would be, "over 3M CE devices by June of 2010" and "nearly 30M by June of 2011". Yet for Netflix, simply between the Xbox 360, PS3 and Wii, Netflix already has more than 50M CE devices in the market today that are capable of streaming Netflix content. Not to mention, Roxio's platform still does not support Mac users, so even if Redbox licensed RoxioNow, it would do nothing in helping Redbox reach users who don't have a PC.

Redbox may come to the market with a digital strategy, but it will take them years to get on the 100 devices that Netflix will be on by the end of this year. While many are quick to talk about different companies challenging Netflix for their streaming service, I think they are forgetting that it took Netflix 3 years to get their streaming service to where it is today. It does not happen overnight, there is a lot of development work involved and it costs a lot of money. That's not to say that Redbox can't spend the money and time to offering something similar to Netflix in the way of streaming movies, but they won't be able to challenge Netflix with any scale for a very long time. And that's without even talking about how much inventory Redbox can amass and how long it will take them to do so.

I think many are forgetting or just don't know how difficult the online movie delivery business is. If it was so easy to replicate what Netflix is doing with streaming, then there would be many others offering the same service in the market, but there aren't.

Disclaimer: I am a customer of Netflix and Redbox and use both services.

Related:

– Detailing Netflix's Streaming Costs: Average Movie Costs Five Cents To Deliver

– Stifel Nicolas Analyst Has It Wrong, Hulu Is Not A Threat To Netflix

– Akamai To Become The Primary CDN For Netflix, But At A Very Low Price

– Breakdown On The Number Of Broadband Enabled Devices Sold In The U.S.

Today, Akamai released details on the number of streams they served for 24 global broadcasters into 65 countries during the World Cup. While traffic to World Cup websites saw a lot of growth from previous years, the number of actual video viewers for the live games peaked at only 1.6M simultaneous streams. Although many in the industry want to proclaim that online video is going to replace TV or become the new medium for viewing video in large numbers, as we saw with the World Cup, that clearly did not happen.

Compared to the Obama inauguration, where Akamai peaked at 3.6M simultaneous viewers, the World Cup was small in size. Akamai wasn't the only CDN to deliver live streams of the World Cup, but they were the largest. So even if you add in the number of simultaneous streams the other CDNs served, the total number of overall viewers watching World Cup games at any give time shows online video isn't displacing TV anytime soon.

Today at 2pm ET I'll be moderating a StreamingMedia.com
webinar with Microsoft on the topic of "IIS Media Services and Microsoft Silverlight". The team at Microsoft just released the Beta of IIS Media Services 4.0, and are busy working on the next release. Attend this session with Chris Knowlton, Senior Product Manager at Microsoft, to learn more about what is available today, and what is coming later this year, in IIS Media Services.

Topics to be covered include:

• IIS Smooth Streaming – including Apple devices, low-latency streaming, and multicast
• IIS Transform Manager – easily ingests and converts multiple formats to Smooth Streaming
• IIS Smooth Streaming Format SDK – add Smooth Streaming to your encoding application
• Silverlight Media Framework – a player framework with full Smooth Streaming support
• IIS Smooth Streaming Client Porting Kit – allows you to natively support Smooth Streaming

Be sure to bring your questions, because there will be plenty of time
for Q&A and on the last webinar, Microsoft answered over fifty questions on Silverlight and Windows Media subjects. You can register here for the free webinar.

Late in the day on Monday, Snapfish, the photo sharing service from HP, announced they had acquired NYC based Motionbox. The company, founded in 2006 by Chris O’Brien and Andrew Wason, provides consumers with a video platform service to easily upload, transcode, edit and share their videos. While terms of the deal were not announced, someone invested in the company tells me that Motionbox was valued at around $20M. Between 2006 and 2009, the company raised three rounds of funding totaling $17.2M, so if the valuation I’m hearing is accurate, this is one deal where the investors didn’t lose any money.

I still remember the first time I met Chris O’Brien, back when he was the CEO of SoftCom and I had just started a streaming media division for Globix. Looking back at my calendar, we first met up for lunch on November 17th, 1998 and since then, have had many conversations about the online video business over the years. When Chris co-founded Motionbox in 2006, and launched their premium service in late 2007, it was at a time when tons of UGC websites were popping up. But unlike the UGC sites that simply tried to get a lot of traffic and sell a ton of ads, Chris was always focused on keeping Motionbox as a service that protected customers videos, giving them the tools to quickly, easily and safely share their content online.

While Motionbox had nearly 3M members, for Snapfish, this deal was all about about Motionbox’s video tools and not their revenue or customers. HP has already announced that Motionbox will close down on August 10th and Motionbox customers can get a 30-day free trial with Snapfish and join their more than 90M members in 22 countries.

Congrats to the Motionbox team and hopefully this deal sets up similar companies like Magnify.net and others to get acquired next.

Update: This morning I heard from three other sources who said the $20M evaluation would be on the high end of the range and would only be achieved if certain performance goals were met. I don’t know what those goals are, but some of them are probably tied to how many of Motionbox’s 2.8M customers sign up for accounts at Snapfish.