Digital Delivery: Blockbuster's Bankruptcy Signals Shift to Online Video Streaming

September 23, 2010 — -- The announcement that famed movie rental warehouse Blockbuster is filing for bankruptcy shows a major shift in the movie rental world.

"Blockbuster is still tied to the world of physically distributed goods and media," said Jim Willcox of Consumer Reports. "The landscape has completely changed. There's a lot more competition and a whole generation of people who are very,very comfortable without packaged media."

Willcox said that along with Netflix, which brought the convenience of movies being delivered directly to your home, the advent of online streaming has hurt video rental stores.

"It used to be a pretty bad experience to stream movies when people had dial-up modems, but the expansion of broadband connection in homes has enabled a lot of services," Willcox said.

Those services include everything from Apple TV to your child's Wii. Many of these devices cost under $200. Here's a quick breakdown of some of the technologies reinventing the way you watch movies.

Netflix: This service, which first let you rent a movie without leaving your couch, now lets users stream videos on their computers as well at no additional cost. Paul Dergarabedian of Hollywood.com said that "between the streaming and the ability to get those movies delivered to your door and including Blu-Ray, that's kind of an irresistible combination."

Vudu: Vudu is an on-demand movie service that you can use if you have a Blu-Ray player or high definition television. It's built into products produced by LG, Mitsubishi, Toshiba, Samsung, Sanyo, Sharp, and Vizio. Willcox from Consumer Reports said that of all the services that help you stream videos, this one produces the best picture. It has a format called HDX which comes the closest to looking like high definition video.

Apple TV: Earlier this month, Apple unveiled a smaller, cheaper version of Apple TV, the set-top box that connects to a high-definition television and can show rented movies and TV shows. The movies and TV shows are either streamed from Apple's own service or from Netflix. Apple TV can also stream YouTube clips and allow you to look at photos on Flickr. When it first launched in 2007, people weren't comfortable yet watching movies online, Jobs told The Associated Press earlier this month, and the gadget wasn't a big hit.

Blockbuster Goes Bankrupt as Video Viewing Changes

Amazon Video On Demand: Miss an episode of "Mad Men"? This service lets you watch an episode instantly for a fee, usually ranging from 99 cents to $3.99. Amazon launched this in 2009. You can watch on your computer or stream on your television if you have a set-top box.

YouTube: Google's YouTube currently has a tab with movies you can watch for free. There are reports that Google is in talks to launch a pay-per-view service of its own.

Redbox: While not a service that lets you stream videos, this vending machine of video rentals has let people rent a movie at the grocery store. Launched in 2004, there are 23,000 locations that let you rent a movie for $1.00 a night. Willcox from Consumer Reports said that the struggle for Redbox will be to strike distribution deals with movie studios so that the movies people want to see are in their vending machines.

Boxee: This service lets you type in a movie or TV show that you want to see and Boxee finds it online from a variety of places and streams it. Right now, you can download the Boxee software to your computer and operate it using a device like an Apple TV. Boxee fans are getting excited because a Boxee box is available for pre-order. It is a set-top box that will communicate with your TV directly. Some say Apple TV should be nervous.

Wii: Wii and other videogame systems let you stream movies through them as well. Wii allows you to stream Netflix videos.