Dallas' Blockbuster Inc. is buying digital movie download service Movielink LLC, the DVD and video game rental chain announced Thursday. Terms were not disclosed, but in March Blockbuster was wrapping up its due diligence of Movielink, and sources put the price around $50 million. The company, created as a legal alternative to illegal downloading, is a joint venture of Metro-Goldwyn-Mayer Studios, Paramount Pictures, Sony Pictures Entertainment, Universal Studios and Warner Bros. Studios.

Netflix Inc. also offers a movie download service, so this deal is another opportunity for Blockbuster to go head-to-head with Netflix in the heated movie rental market. Blockbuster has an edge in the mail-based delivery segment. Its Total Access service is adding members faster than Netflix. Of course, neither company is posting stellar numbers. Netflix shares peaked at $30 in the past year and last traded at $17.97, near their 52-week low of $15.62. Blockbuster shares haven't done so well either; they haven't breached the $10 mark since the summer of 2005 and last closed at $4.23. It'll be interesting to see who wins this battle.

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