The linking up with hardware manufacturers is an important move for Quickflix as it prepares for the launch of an online movie streaming service in late 2011. Connected devices are at the heart of the company's digital distribution strategy, as the presence of its streaming service on these devices naturally translates into  a more compelling service for consumers. Netflix, for example, has seen the move onto connected living room devices drive the takeup of both its streaming value-add offer for DVD-by-post customers and, more recently, its streaming-only packages in the US and Canada. Ultimately this and similar moves from Lovefilm in the UK and Germany are part of a long-term transition strategy to migrate the subscription DVD by post offer online, and transform the business into something more akin to a next-generation HBO than the current physical business. However, now that Telstra has no interest in the service Quickflix, like Netflix in Canada, might yet run into some challenges from the relatively strict data caps imposed by ISPs in Australia.

Meanwhile, the removal of BM leaves the market open for a single operator. One dominant operator is in keeping with online rental markets in other territories. Netflix dominates the US market, having effectively seen off competition from both Blockbuster and Wal-mart, whilst Lovefilm, now a fully-owned subsidiary of Amazon, dominates online rental in the UK, following a sustained period of consolidation which included the closure of Amazon's own online rental division. Blockbuster continues to offer online rental in the US and UK, but it has never entered this market in Australia. Blockbuster's Australian operation is a franchise business run by the Franchise Entertainment Group (FEG), operator of Australia's largest store-based rental chain Video Ezy and video retailer EzyDVD, and is thus a separate legal entity that only licenses the name from the US parent. IHS Screen Digest understands that FEG does not think this business model is suited to Australia, a view that is supported by the fact that, eight years after Quickflix launched and six years after its IPO, only 1.1 per cent of Australian DVD households subscribe to an online rental service, compared with 5.4 per cent in the UK and over 20 per cent in the US. It therefore always seemed unlikely that two companies could successfully co-exist in the relatively under-developed Australian online video rental business. However, the combination of acquiring its only real rival, the anticipated improvement of Australia's broadband infrastructure under the ongoing roll-out of the country's high-speed National Broadband Network and, crucially, the breakthrough deal with Sony may help Quickflix achieve its stated aim of shifting its business model away from purely physical product and into digital delivery.