Nov. 3 (Bloomberg) -- Best Buy Co., the world’s largest electronics retailer, will start an online store for movies and television shows that will compete with Apple Inc.’s iTunes.

The service will use technology licensed from Sonic Solutions Inc., according to a statement today from both companies. Sonic’s Roxio CinemaNow system will be installed on televisions, computers, Blu-ray players, set-top boxes and mobile phones sold by Richfield, Minnesota-based Best Buy.

The digital video store expands Best Buy’s foray into services, helping the company increase customer loyalty, Chief Executive Officer Brian Dunn said in the statement. The content will be stored on servers so people can watch on any device, similar to how Web-based e-mail can be viewed on different computers, said Sonic Chief Executive Officer Dave Habiger.

“What we’re creating is movies in the cloud that play back anywhere,” Habiger said in an interview.

Sonic Solutions, based in Novato, California, rose 89 cents, or 17 percent, to $6.13 at 10:34 a.m. in Nasdaq Stock Market trading. The stock had almost tripled this year before today. Best Buy fell 31 cents to $38.58 in New York Stock Exchange composite trading. The shares had risen 38 percent this year before today.

Sonic’s technology will be included on devices made by Samsung Electronics Co., Sony Corp. Panasonic Corp., Toshiba Corp. and other manufacturers. The service will allow customers to buy or rent new releases, according to the statement.

Digital Delivery

The deal “allows Best Buy to quickly establish a strong position in the digital delivery of video entertainment,” Best Buy’s Dunn said in the statement.

Best Buy services also include Geek Squad technical support.

Apple’s iTunes sells digital downloads of films and TV shows and has withstood online threats from other retailers. Netflix Inc. offers mail-order DVD rentals and streaming of older releases.

Sonic has 22,000 movies in its library and licensing deals with every major Hollywood studio, Habiger said. The company, which already provides technology for Blockbuster Inc.’s online store and TiVo Inc.’s digital-video recorders, releases most of its movies on the same day they can be rented on DVD.

Declining DVD sales as a result of mail-order and kiosk rental services made the studios more interested in striking digital-distribution deals, Habiger said.

“Without some of those things collapsing their margins, this would have taken a lot longer,” he said.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

Last Updated: November 3, 2009 10:39 EST