With digital technology wreaking fundamental change to the home entertainment business, Jim Keyes worries that the industry lacks the kind of leadership at the retail level that can drive product innovation and new business models to meet emerging consumer needs. Video Business via NewsEdge : With digital technology wreaking fundamental change to the home entertainment business, Jim Keyes worries that the industry lacks the kind of leadership at the retail level that can drive product innovation and new business models to meet emerging consumer needs. But one year into his post as chairman and CEO of Blockbuster Inc., he sees an opportunity to fill the void. “The industry has really lacked leadership on the retail side,” Keyes told VB in an interview on the eve of his anniversary. “We are the closest to the customer. If change is going to happen, Blockbuster will have to take a leadership role. We put a stake in the ground with Blu-ray; were working very aggressively with the studios on the rollout of that format. But there are other areas where I also think we can take a leadership role.” One of those areas—perhaps the biggest—is the convergence of media content and entertainment devices, at both the retail and service levels. That goal was behind Block-busters controversial bid to buy electronics chain Circuit City. Blockbuster withdrew the bid last week, after completing preliminary due diligence, citing unfavorable “market conditions.” But Keyes hasnt given up on the idea. “We dont actually need to acquire Circuit City to pursue our strategy,” he said, prior to Blockbuster withdrawing its bid. “We can use technology to expand our product offerings, including adding consumer electronics.” Blockbuster is testing the idea of arming its in-store sales people with tablet PCs connected to the Internet to assist customers in purchasing products not in the store, such as entertainment devices. “You can interrupt the customer as theyre standing in front of a [download] kiosk, or a small display, and make an Internet-assisted sale by helping them through the transaction and ringing up the sale on the spot,” he said. Blockbuster also plans to leverage technology to improve its traditional DVD rental business. “If we can leverage technology to better predict how many copies [of a movie] we need to stay in stock on a Friday night in a particular location, we can do a better job of satisfying the customer,” he said. Blockbusters boldest bid to leverage digital technology in its stores, however, is its planned download kiosks, which will allow customers to transfer movies to a portable device in under a minute. “Theres a lot of emphasis on getting content from the Internet to the TV, but we have a little different perspective,” Keyes said. “The game was won in music by portability. It was the ease of download to a portable device that won the game for Apple. But if you look at their video solution, its not very effective. Downloading video is still not easy and it takes too long. That undercuts portability, which I think is going to be very important.” According to Keyes, in-store kiosks, or remote-sited units in airports or other locations where portability is at a premium, can help bridge the gap by making the process of getting movies onto hand-held devices quick and easy. The kiosks also can be useful for expanding the titles available in a Blockbuster store without having to stock additional DVDs. The retailer plans to sell portable storage devices and docking stations that connect to a TV set, allowing movies to be downloaded from a kiosk and watched at home. “When I look at the way people talk about how digital services will be bought and sold in the future, I just cant imagine what theyre thinking,” Keyes said. “Not everything is going to be accessed directly online and downloaded. When you buy a device for a particular service, doesnt it make more sense for that service to be embedded in the device? Some things are going to be accessed from kiosks or on memory cards. There will be a lot of different ways to access content. All of it will be digital but it will come in a lot of forms.”