LOS ANGELES -- Blockbuster Entertainment Corp. and International Business Machines Corp. said Tuesday they have formed two joint ventures to deliver music, films and games electronically to retailers.
The companies, which first disclosed their retail partnership in January at the winter Consumer Electronics Show, said consumers will want on-demand retailing in stores as they become more familiar with digitally based multimedia techhnology.
'In this decade, the ability to communicate ubiquitously will explode,' said James A. Cannavino, IBM senior vice president. 'Communications bandwidth for digital information will expand at a rate even greater than the microprocessor growth in the 1980s.'
Blockbuster and IBM's Fireworks Partners said Fireworks will invest in NewLeaf Entertainment Corp., a successor to Blockbuster's Soundsational Inc., and create a new company, Fairway Technology Associates. Both companies will be located in Deerfield Beach, Fla.
The companies did not disclose the exact amounts of their ownership in the joint ventures or how soon the distribution system will start operating. Fireworks was created last January by IBM, of Armonk, N.Y., to work on joint multimedia projects as the computer giant looks for profitable areas outside its declining mainframe business.
Using Fairway's technology, music or video would be digitzed into computer language, compressed and sent on high-speed phone lines to a massive computer storage center linked with stores. Such a capability would essentially allow music stores to make compact discs and videos on the premises and eliminate the need for large inventories.
Compact discs are likely to be the first area exploited by the ventures, which still face a daunting task of signing up record labels to participate.
In addition, consumers would be able to find the desired recording whenever they went in a store. IBM has estimated that the lost sales opportunities from music being out of stock amounts to more than $1 billion a year and currently occurs with 43 percent of music shoppers.
Stores typically carry about 12,000 titles, but the Blockbuster-IBM system could mean a stock of 100,000 titles would be available.
The companies said NewLeaf has been working with retailers and owners of entertainment software to improve the distribution and merchandising of their products. Fairway will work on the hardware for such a distribution system.
Blockbuster, the king of the home-video retail businesses, has moved rapidly within the past year into music sales by buying the Music Plus and Sound Warehouse chains and plans to open 'megastores' with Virgin Group to sell other items such as computer software and video games.
Blockbuster, of Fort Lauderdale, Fla., has also bought 35 percent of Republic Pictures Corp., an independent producer and distributor, and a majority interest in TV producer Spelling Entertainment Group Inc. Blockbuster is also considering a start up of its own cable-television superstation.
