"Our relationship with Sonic Solutions allows Best Buy to quickly establish a strong position in the digital delivery of video entertainment," said Brian Dunn, CEO of Best Buy. "It also enables us to make deeper and more meaningful connections with our customers and expand our relationships with content owners and hardware vendors to create compelling new home-entertainment solutions."

Best Buy On Demand

Best Buy plans to embed the Roxio CinemaNow technology on many different devices it sells, from Web-connected TVs to portable media players, from PCs to Blu-ray Disc players, and from set-top boxes to mobile phones. Using the service, consumers can buy or rent premium content, including movies, TV shows, independent films, and older catalog movies, and access them on the devices.

Best Buy expects new titles to often be available on the same day they launch on DVDs at retail. Together with their studio partners, Best Buy and Sonic also plan to collaborate on new service and content offerings, including leveraging digital copies to bridge physical disc sales and electronic sell-throughs.

"With Best Buy's ability to drive in-store promotion and education, consumers will come to quickly understand and appreciate the convenience, flexibility and control that digitally delivered video entertainment affords them," said Dave Habiger, president and CEO of Sonic Solutions. "With Best Buy's focus, we expect on-demand entertainment to quickly grow into a mass-market activity, with digital sell-through and rental becoming a significant new revenue stream for content owners."

Can CinemaNow Topple Netflix?

As one of the largest consumer electronics retailers in the world, Best Buy is positioned to compete in the digital marketplace with the likes of Amazon.com, Blockbuster, Netflix and Apple's iTunes Store. Best Buy will leverage its online presence and brick-and-mortar stores to promote the service. Best Buy is also launching a marketing program to educate consumers about the convenience, flexibility and choice that digital content offers.

Although Sonic's CinemaNow will still trail iTunes, Amazon and Netflix, Phil Leigh, a senior analyst at Inside Digital Media, said the Best Buy connection could help drive new revenues for the digital-delivery brand.

"Best Buy is going to try to encourage manufacturers to enable this CinemaNow capability on their hardware. So the Best Buy deal gives CinemaNow a little additional leverage with TV-set and hardware manufacturers," Leigh said. "Apple can't use that same leverage."

Still, Leigh sees a major challenge ahead for Sonic because the on-demand digital delivery space is already dominated by Apple, Amazon and Netflix. As he sees it, CinemaNow can hope to become the leader of the second group of companies in the on-demand video space, but isn't likely to displace the current market leaders because consumers are already entrenched in those services.