Terms of the agreement for Movielink -- which was created in 2002 as a joint venture of major movie studios Metro-Goldwyn-Mayer, Paramount Pictures, Sony Pictures, Universal Pictures and Warner Bros. -- were not disclosed. But The Wall Street Journal reported that the purchase price was less than $20 million.
Blockbuster has seen its movie-rental business lose share to both DVD-by-mail service Netflix and cable operators' video-on-demand offerings. It also faces competition from movie-download services from Apple, Amazon.com, Wal-Mart Stores and CinemaNow, as well as a streaming service launched by Netflix earlier this year.
Blockbuster said the Movielink acquisition will give it "access to one of the largest libraries of downloadable movies and a large array of television content," and will allow it to offer consumers downloads via PCs, portable devices, home networks connected to TVs and certain set-top boxes.
"Our acquisition of Movielink, with its associated digital content, is the next logical step in our planned transformation of Blockbuster," said Jim Keyes, Blockbuster chairman and CEO, in a statement. "Now, in addition to the entertainment content we provide through our stores and by mail, we have taken an important step toward being able to make movie downloading conveniently available to computers, portable devices and, ultimately, to the television at home."
Blockbuster said it will continue to operate the Movielink service and eventually make elements of the service available through Blockbuster Online.