Comcast (CMCSA) VOD Could Cripple BlockBuster (BBI) And Netflix (NFLX)

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Comcast (CMCSA) has been conducting a test with the Warner studio, releasing VOD versions of movies at the same time that the DVDs come out. Apparently, the tests have been a success and Warner saw an 50% increase in VOD sales rates.

Warner recently made note of the fact that it keeps only 15% to 20% of the DVD rental revenue for its content. It gets 60% to 70% of VOD revenue.

Other studios are almost certain to have watched the trial with interest.

A roll-out of the service could do some real damage to the DVD-through-the-mail businesses of Blockbuster (BBI) and NetFlix (NFLX) both of which are only now working on internet movie download services.

Neither of the DVD rental companies needs this headache now, especially Blockbuster. The big store-based movie operation has watched its stock drop over 50% during the last two years as Wall St. has become concerned that rent-though-the-mail and video-on-demand will by-pass the model of consumers going to physical locations. The company has started its own DVD mail operation.

NetFlix (NFLX) stock is down 25% in the last six months, in part because large content companies are looking at the internet as a means of delivering their products to the home. It also now has Blockbuster as a competitor in the "mail" business

The Comcast VOD product can hardly be viewed as anything other than bad news.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.