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Blockbuster price hike will send customers packing

Posted Dec 21 2007, 06:15 AM by Kim Peterson
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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.

Comments

 

Been a Blockbuster member for 13 yrs.  Havent been in the local store for over a year. Before that probably 2yrs.  Dont rent anymore because most of the stuff that comes out is trash anyway.  Remakes of classics and things with so much special effects you cant see the acting....Try watching Alistair Syms in the 1930's version " A Christmas Story".  Or how bout going watching the original "Ladykillers"  with Lawrence Olivier,  Peter Sellers and the other guys that will all be stars later.  Now those are movies.  So Blockbuster can raise its rates for all I care.  There, BAH HUMBUG!

That's interesting. I'd say Blockbuster is thoroughly confused. They just went through a process of closing numerous stores (including the one by me) so that they could concentrate on their mail program to compete with Netflix. Now they are reversing that decision and wanting to concentrate on their stores. Make up your mind Blockbuster before you are out of the business all together! I will be cancelling my membership with them completely,,,both in store and the mail program. The mail program is too expensive now with the increase and they closed the nearest store to me. Easy decision....

sign me up as one who will be leaving

blockbusters movie selection isnt great

i only did it for the instore rentals

ill go back to netflix for my online now

Blockbuster has moved the way of AT&T, Ford, GM and Chrysler.  They have the "geniuses" with no common sense or economic application experience.  If they think raising prices parallels profit, they are sorely mistaken.  When income from pay-telephones fell for AT&T, they raised the price of a call so as to further reduce usage.  The Big Three did the same thing, without raising quality to a level of the foreign competition.  Where has common sense gone in America?

Block Busters in store Business model and their over charges, poor customer support, long lines, stupid immature sale people, these are the reasons why I switched to Netflix

But Netflix is no winner either, they have a bait and switch tactic, I find them very slow on shipping, first few weeks they were fast, after that slowed down to one or two shipments per week, no matter how fast I get the DVDs to them.

To be completely honest, both companies are horrible. I have had service with both, and more times than not the movies came damaged. The movie would always seem to start skipping at the climax of the movie too.

I have not rented a movie from Blockbuster for over five years now when I was charged a late charge for returning a movie 4 minutes late -- after I had waited over ten minutes in line to do so.

They got me that time, but they have never, and neve will, get me again.

As the old saying goes, you might win the arguement, but you loose the customer.  Redbox has great deals, 24 hour access, and $1/night for new releases if they are available in your area.

I am seriously considering dropping my plan with Blockbuster since I was told yesterdAY O F THE PRICE INCREASE.  They increased it this summer also.

I cancelled after 4 years of service. I refuse to rent in the store as well. At $4 a movie and $7 a game, it gets a little pricey and if you are even 2 days late .. but wait!! they don't have late fees anymore, THEY CHARGE YOU $21 for the movie!! It's crazy!! I went to Netflix

Even if I have to go to a "brick and mortar" building, I'm going to Hollywood Video. There is more selection, the employees seem more laid back, they have a room designed just for video games, and they have more DVD's on sale. Lackluster video's days are over.

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