According to this Reuters report, U.S. movie rental chain Blockbuster Inc said on Wednesday it has bought film download service Movielink for undisclosed terms, giving it a stronger hold in an area where rival Netflix Inc is also staking a claim.

Movielink and Netflix both offer streaming online video, which lets consumers watch movies over the Internet right on their computer. Or, if they have media PCs in the living room, they can also watch the movies on their large living room televisions.

Vongo offers a similar service, and one that also works on mobile devices like the Toshiba Gigabeat series.

The downside of all of these services is not picture quality, surprisingly, but selection. The licensing systems work differently than they do for DVD rentals, so each catalog only has about 1,000 movies (give or take) available for streaming, instead of the usual high five-figure numbers available for rental through the mail.

Blockbuster Buys Movielink [Reuters via PC Magazine]