Blockbuster price hike will send customers packing - Top Stocks
 
Search Top Stocks:

Blockbuster price hike will send customers packing

Posted Dec 21 2007, 06:15 AM by Kim Peterson
Filed under: ,
Rating:

Blockbuster continues to struggle with balancing its online rental plans with its more profitable in-store business. The company said yesterday it's raising prices for its Total Access subscription plans, and Citigroup analyst Tony Wible said he thinks half of the subscriber base will ditch.

In a nutshell, the premium plan increases by a shocking $10 to $35 a month. That plan allows you to rent three DVDs at a time online with unlimited in-store trades.

If you rent one DVD at a time, the price increases by $2 to $12 a month. The most popular plan, which gets you three DVDs at a time, will cost $21 a month. These plans let you rent DVDs online or at stores. To ease the pain, Blockbuster is cutting the monthly price of some of its by-mail plans by $1.

Rival Netflix saw an immediate gain from the decision, with shares jumping nearly 10% yesterday to $27.24. Blockbuster shares barely moved and closed at $3.55. Blockbuster has 3.1 million online subscribers, compared with 7 million for Netflix.

I think Blockbuster is trying to drive online customers away -- and into its stores. Online rentals is a niche market, one that Netflix has successfully dominated. There just isn't room for another big competitor, and Blockbuster found that going toe-to-toe with Netflix was too expensive and distracting.

So Blockbuster's going to focus on its stores, paying the short-term price of customers jumping to Netflix. Blockbuster has an obvious brick-and-mortar advantage: You can get a movie right away, without having to wait for a DVD to arrive in the mail. (Netflix is offering streaming movies, which gives instant access, but that business isn't mature yet.) Also, Blockbuster can seize the in-person rental opportunity to sell other goodies, including used movies and video games as well as popcorn and candy.

It's really interesting to watch this company figure out its online business. Blockbuster acquired Movielink last year, so it's obviously keen on some sort of digital offering. The company just isn't moving forward with it, and that's OK for now. But Blockbuster can't ignore the Internet forever.

Back to Top Stocks Digg this | Email this | Link to this
Comments

 

I prefer to use the movies that come OnDemand with Comcast (I live in CT). I used to be able to rent a DVD for about $4, and now it's up to $5.... it's easier to just stay home and order a movie OnDemand for $3.95 - and you don't have to worry about the newest releases not being in stock.

Jessica (Posted 12.21.07 8:46 AM)

Goodbye Blockbuster, hello Netflix.

I can't stand Blockbuster and I love Netflix..it would'nt matter if I was the only person that held that view. Problem for BB is that everyone else feels the same way that I do. Don't have to beleive me...the stock priices prove it.

R.I.P Blockbuster!!

Santa Clause (Posted 12.21.07 8:49 AM)

I have been a netflix subsciber for a good while and I find it a good value.   Who would pay blockbuster $35 when you can pay netflix half for the same service.   If blockbuster mailin service is a money loser, why don't they just eliminate it.

harvey (Posted 12.21.07 8:51 AM)

I know that when I got the email yesterday about ANOTHER price increase, I immediately sent an email displaying my disgust, and that next year I will be a Netflix customer.  

Jason (Posted 12.21.07 8:51 AM)

Blockbuster lost me as an in-store renter with all the different price programs ( which I thought excessive ).  Everytime we would rent it seemed that the prices changed as did the program we were under.  Blockbuster drove us to the competition and we are happier and financially better off.

Thank you Blockbuster

Dave B-Indianapolis (Posted 12.21.07 8:52 AM)

Blockbuster is responsible for driving nearly every mom and pop video store in the country out of business.  I hope they crash and burn.

Dan (Posted 12.21.07 8:53 AM)

I will have a 50% increase for my subscription to get two movies in the mail and have the option of exchanging them out at the store.   This was good deal at $18 whitch it was at originaly.  At $21 it was ok, but at $29 I'll go to netflix or get it from TimeWarner on demand.  Who ever worked this out should be canned.  If the price would have went up $4-$5 bucks I might have taken it, but a huge jump like that leads me to believe that the leaders of the company have lost touch with the average joe.  

Joshua (Posted 12.21.07 8:53 AM)

Remember not every person has a computer.  There will always be a market for the Blockbuster stores.

Chelsea Jones (Posted 12.21.07 8:53 AM)

Horribly written article with the lead stating that the lead stating that the plan is rising to $35 a month then it goes on to talk about various other plans that cost less. What is the point here?

rodger (Posted 12.21.07 8:58 AM)

Blockbuster will continue to struggle. I have not only been a subcriber, but also a fan since they allowed me to exchange on line in the store as well. What this price hike tells me is they thought the impact to the in-store business would be less then it actually is. At the end of the day it's still about profit and losses and not the customer experience.

Darick Lane (Posted 12.21.07 9:00 AM)

Next Comments >>

Send a Comment

Comments must be directly related to the blog entry. Comments with offensive language will be deleted. Your e-mail address won't be displayed.

(please, no HTML tags. Web addresses will be hyperlinked):