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A class-action lawsuit has been filed against Facebook and other sites for their participation in Facebook’s Beacon program.

The controversial program, which turned into a publicity disaster that Facebook founder Mark Zuckerberg apologized for, alerted a user’s friends about their activity on other sites, for example buying movie tickets on Fandago. Beacon sparked an outcry from Facebook users, who saw it as a violation of privacy and complained that it was difficult to opt out.

In addition to apologizing, Facebook revamped the program so users weren’t automatically signed up, and instead could choose to opt-in. The backlash was also a bit of a turning point for social networks, since it illustrated that it’s a delicate balancing act to make money from the “social graph” without angering users. But that seemed to be the end of the matter, and users moved on to complaining about new things like Facebook’s revamped design.

Now a group of users is demanding that Facebook delete any data collected from the program, award restitution and return any money earned in violation of privacy laws. The suit alleges that tens of thousands of users are affected, and also names Blockbuster, Fandango, Overstock, Hotwire, STA Travel, Zappos and Gamefly as defendants.

Earlier this year, a Texas woman filed suit against Blockbuster for its participation.

I can’t really say how strong this case is from a legal perspective. But even if, as I suspect, it won’t have a leg to stand on, these continuing lawsuits can’t be good news for Facebook or any social network thinking about trying something similar.

While company after company enter the digital movie download realm including former outsiders like Apple and Microsoft, the company once synonymous with movie rentals has been noticeably absent: Blockbuster. This was especially surprising since it bought movie download site Movielink nearly a year ago presumably to enter the fray. Now it finally is.

Blockbuster has rolled out a very limited test of its Movielink implementation, according to The Dallas Morning News. 500 select users now have links to digitally download movies on the Blockbuster website.

500 is a laughably small test, but that number will keep expanding each week throughout the summer until a launch of what The Dallas Morning News is calling Blockbuster.com Movielink. You’d think Blockbuster could come up with a better name than that.

One element that does sound very intriguing is the supposed rental price: $2. It also seems that you will be able to download movies to own on the site for relatively cheap: $8 and up.

No word on how this will effect Blockbuster’s laughably bad initial digital distribution effort: In-store movie kiosks. After dropping its ill-conceived attempt to buy retailer Circuit City, perhaps Blockbuster is really starting to wake up.

The question is: Is it too late? Blockbuster now has competition ranging from the aforementioned Microsoft (which recently announced it was partnering with Netflix to bring its movies to the Xbox 360 gaming console) to Sony (which is launching its own digital movie download service for its PS3 device) to Apple (which has the Apple TV and iTunes movie store). There is also Amazon, Vudu and Roku (which also has a deal with Netflix, but is looking to expand with other services as well).

Blockbuster has not yet said how it plans to get movies downloaded into your living room and on your television, which all of the other services are now working on.

Blockbuster paid $20 million for Movielink, which was a considerable deal considering its investors had poured $100 million into the company.

Blockbuster today issued a one paragraph statement to announce it was withdrawing its proposal to purchase electronic retailer Circuit City. This is the way a takeover bid ends. Not with a bang, but with a whimper.

Citing “market conditions,” Blockbuster determined it wasn’t in its best interest to purchase the struggling chain. Those market conditions likely being that both companies stocks are in the tank.

When Blockbuster made its initial bid in April, Circuit City’s stock was around $4-a-share. Immediately after the proposal was announced, it jumped to $5-a-share. Now it’s around $2.50-a-share, almost exactly even with Blockbuster’s stock price as they race each other to the bottom.

Blockbuster is also claiming to have done its “initial due diligence process,” which perhaps means little more than listening to any expert, advisor or analyst who had no idea why it was doing this deal.

The deal was a $6 to $8-a-share cash offer, which could have been worth as much as $1.3 billion. For the deal to work, Blockbuster would have had to borrow quite a bit of money. That would have been risky, especially in this economic climate.

What Blockbuster needs is actual strategy for how it’s going to remain a business going forward. The move to digital distribution is already beginning, and Blockbuster, having slept through most of the DVD rental-by-mail period where Netflix ate its lunch, needs an answer. An answer better than in-store kiosks.

“We continue to believe in the strategic merits of a consumer retail proposition that would bring media content and electronic devices together under one brand. We will pursue this strategy through our Blockbuster stores as a way to diversify the business and better serve the entertainment retail segment,” Blockbuster chief executive Jim Keyes wrote today.

Yeah, good luck with that.

Blockbuster’s largest shareholder happens to be none other than the resident thorn-in-Yahoo’s-side, Carl Icahn. He indicated in the past that if Blockbuster couldn’t do this deal with Circuit City, he may just take the electronics chain over. I don’t know about you, but I’m going to be reading The Icahn Report, Icahn’s blog, tomorrow.

[photo: flickr/RocketRaccoon]

While nearly everyone and their mother is getting in to the digital movie distribution business, one name still notably absent is Blockbuster. Despite being nearly synonymous with movie rentals for the past twenty years, and buying the digital download service Movielink last year, Blockbuster still has not been able to get its act together in the digital world.

Today, at its annual shareholder meeting, the company showed off yet another direction it is attempting to take on the road to digital: kiosks.

I find this interesting and somewhat humorous. After all, to use a kiosks you have to be, you know, at a kiosk. Considering you are probably not going to have one of these in your home, doesn’t this negate one of the major advantages of digital distribution: instant access?

These machines, which should begin to roll out to select Blockbuster stores in the next three weeks are being developed by NCR Corp, according to the Associated Press. For the pilot tests, the kiosks will only work with the Archos portable media player, however the company says compatibility with a wide range of devices will eventually follow. No word on if that includes a certain device that begins with a lower-case “i”, but seeing as those only sync with iTunes, I wouldn’t count on it.

Considering how many people watch digital movies on portable devices and then subtracting all those who do so on iPods, you have to wonder why exactly Blockbuster is wasting its time on such an endeavor. Blockbuster undoubtedly thinks this will be a big trend in the future, but if such activity does catch on, it’ll probably be on advanced cell phones like the iPhone, probably not stand alone devices like the Archos. Eventually, this activity will take place wirelessly over the Internet as well. I just don’t get it.

Perhaps Blockbuster is stalling. All of its main rivals have major digital distribution options now while it does not. While digital movie distribution is not a huge business yet, it will be, and the longer Blockbuster waits to get into it, the less likely it is to be a leader in the field.

It’s also noteworthy that during the meeting the company barely mentioned its proposed takeover of electronics chain Circuit City — another less than stellar idea in my book. Absent from the meeting was Blockbuster’s largest shareholder, Carl Icahn. Icahn has said he will simply buy Circuit City if Blockbuster can’t for whatever reason. You may recall that Icahn is also taking hostile actions to take over Yahoo.

No word on if he’ll buy either Circuit City or Yahoo from a kiosk.

[photo: flickr/goldberg]

You probably already know this, but the days of going to a video store are ending. Online DVD rental service Netflix announced its earnings earlier today and beat expectations in a number of key categories including profits (up 36 percent) and subscribers (up 21 percent).

This news makes former industry giant, Blockbuster, look even more foolish. Blockbuster, which has been trying to compete with Netflix in the online DVD rental business, has been mired in bad financials for years. Held down by an albatross around its neck, which used to be its greatest assest — its brick and mortar stores — the company is struggling to define itself in the 21st century. A couple weeks ago, it made an almost humorous attempt to buy fellow lackluster company Circuit City. We’re still wondering why that makes any sense.

But not all is great for Netflix either. The company’s stock actually fell despite the good news today because the outlook for the future is less sunny. The cost of building its online movie download service led the company to lower expectations on earnings per share. Netflix could actually find itself in a similar situation to Blockbuster soon as it must transition its business to a new model with the inevitable rise of digital movies.

However, by taking these hits now and putting an infrastructure in place to compete in the digital realm with the likes of Apple and its iTunes movie rental store, Netflix is thus far proving it doesn’t want to end up like Blockbuster.

The race for the living room is on. Apple and Microsoft are already there with the Apple TV and Xbox 360 devices that can stream movies to televisions, but neither are a dominant force yet. Netflix has already said it would team up with LG to make a box to stream its movies to the living room, but today it announced further partnerships in place (it declined to state the other companies aside from LG) to ensure it has a set top box that can grab a foothold.

Blockbuster is said to be entering the living room race as well, and as long as it is there to beat up on, Netflix should be just fine.

[photo: flickr/brymo]

Blockbuster was once a name synonymous with movie rentals. Then Netflix, the online DVD mailing service, came along and stole some of that luster. Recently, as the transition to digital distribution for home movie rentals/purchases has begun, Blockbuster has seemed almost comically behind. That reputation could get worse with the company’s offer today to buy number two electronics retailer Circuit City.

The $6 to $8 a share dollar cash offer, which could be worth as much as $1.3 billion, simply does not make a lot of sense. Blockbuster notes that the combination would make an $18 billion global enterprise, but a lot of companies can be crammed together and a big number thrown out there; it doesn’t mean they should be.

Both Blockbuster and Circuit City have been struggling amid strong competition from the likes of Netflix and Best Buy respectively. Both have stocks that have been bottoming out recently — Circuit City’s stock was trading at just under $4-a-share before the deal, Blockbuster’s was even worse, closer to $3. If stock prices are any indication, investors don’t understand this deal either — at least for Blockbuster. While Circuit City is soaring, up nearly 30 percent on the news, Blockbuster is tanking, down almost 13 percent right now.

Both companies had some positive news recently. Blockbuster finally appeared ready to take digital distribution seriously with talk about entering the the living room set top box game and saw profit climb on some cost-cutting the company has been doing. Circuit City also cut costs last quarter and pulled in a profit. This deal looks to negate these slight turnarounds.

A private offer is said to have been made before Blockbuster took a page from Microsoft’s book in its pursuit of Yahoo and took the deal public. Now, Circuit City seems just as confused as all of the analysts about the deal. Circuit City has issued a statement questioning if Blockbuster could even finance such a deal:

Among those questions are whether the proposed acquisition would require a refinancing of the existing Blockbuster debt, and if so, what would be the terms and structure of any new debt; how large a rights offering would be required to fund the transaction and what steps Blockbuster has taken to provide a backstop to ensure successful execution of the rights offering contemplated; and what precise internal and external approvals Blockbuster anticipates for a proposed transaction, including approval of the contemplated rights offering by Blockbuster shareholders and registration of the offering with the Securities and Exchange Commission.

Michael Pachter of Wedbush Morgan Securities also questions the financing of such a deal:

Our initial analysis of the deal leads us to tentatively conclude that Blockbuster intends to raise around $500 million through a rights offering, plus an additional $500 - 800 million in incremental debt. The combined company would have around $120 - 150 million of EBITDA before synergies, implying a debt to EBITDA ratio of 6 - 11x. It is not clear to us that Blockbuster will succeed in financing this transaction.

He goes on to note:

We think that Blockbuster’s move is premature, and borders on being reckless. Circuit City runs its business as a “big box” retailer, and its business is particularly challenged by a worsening economic environment, a well-run competitor, and a constantly changing product offering.

One major problem Blockbuster has had in the Netflix world is that its brick and mortar stores cost too much money to operate. That is exactly why it decided to close hundreds of them. Little did anyone know that the plan then included buying another company’s struggling brick and mortar stores.

[photo: flickr/Elise esq]

Video rental company Blockbuster has bought the Internet video download movie provider Movielink, in its latest dash to compete with companies like Netflix and Wal-Mart.

Movielink, of Santa Monica, launched in 2001 and became the first service to offer legal downloadable movies and TV shows.

The price was a mere $20 million, according to WSJ, suggesting this was a fire sale — and a significant loss for its former owners, who had pumped $100 million into the effort.

Blockbuster is acquiring rights to show the films of Movielink’s previous owners, which include Warner Brothers Studios, Metro-Goldwyn-Mayer and Paramount Pictures, according to various news reports. Financial terms were not disclosed. The company’s other owners included General Electric’s movie unit Universal Studios and Sony Pictures Entertainment. Blockbuster is also an investor in a CinemaNow, which has thousands of film, TV and concert titles, and offers streaming videos, which Movielink does not.

Netflix, Apple, Amazon.com and Wal-Mart Stores have all introduced movie download services.