AOL Grabs Piece of Blockbuster.com

In a broad three-year alliance between two leading interactive media and entertainment companies, America Online (NYSE: AOL) will invest $30 million (US$) and take an equity stake in Viacom subsidiary Blockbuster.com.

The deal will make Blockbuster a premier video provider on AOL’s Entertainment Channel via a co-branded site that is scheduled to be re-launched by next month.

In exchange, AOL will receive extensive in-store and media promotion from Blockbuster, including the distribution of the new free AOL 5.0 CD-ROMS from 4,000 Blockbuster stores across the United States.

“This strategic alliance between AOL and Blockbuster creates a new force in the home entertainment industry,” said Blockbuster CEO John Antioco. “The coupling of AOL’s leadership in interactive services with our strength in home entertainment provides us both with immediate opportunities to offer new services to both our memberships.”

AOL Gets Offline Promotion

In addition to the CD-ROM distribution, AOL will receive promotion on Blockbuster’s in-store TV network and on national programming such as the Blockbuster Entertainment Awards.

Blockbuster will be an anchor tenant in AOL properties including [email protected], AOL.COM, CompuServe, Netscape Netcenter and Digital City shopping destinations. AOL will integrate Blockbuster’s entertainment content into its programming, while Blockbuster will provide entertainment information for the My Calendar feature available with AOL 5.0.

Shop ‘Til You Drop

The Dulles, Virginia-based AOL also announced today that it has signed over 160 new companies to be featured in its [email protected] marketplace. That gives it a total of 275 merchants since the shopping mall — which AOL says Forrester Communications called the “Internet’s Miracle Mile” — launched in July.

Among the newcomers are Crate and Barrel, Victoria’s Secret, Fogdog.com, iTurf, Furniture.com, Balducci.com and Steve Madden Shoes. These entries join the existing roster of merchants, some 95 percent of which have renewed their contracts.

The company also disclosed that [email protected] rotates some 30,000 promotions per week – or 450 an hour.

[email protected] is unique in that it was developed by a team of merchandising experts, who work closely with our partners to develop innovative and effective campaigns to help them drive shoppers to their sites, increase sales and achieve their business objectives,” said AOL President Bob Pittman.

Blockbuster Looking To Regain Value

Blockbuster, which has struggled with launching entertainment superstores in recent years, is now worth significantly less than the $7.7 billion Viacom paid for the company in 1994. Blockbuster went public at $15 on August 11th, below its proposed range of $16 to $18.

Shares of Blockbuster soared 1-1/2 to 14 in early trading today, giving the company a market value of $2.45 billion. On Friday, ING Barings initiated coverage of Blockbuster with a buy rating and a $24 price target.

Shares of America Online were up 1-7/8 to 135 in early trading today.

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