Blockbuster has decided to go head-to-head with Netflix in the $280 million online video subscription business. The Dallas-based video store chain has launched its own Blockbuster-branded DVD rent-by-mail service to compete with industry pioneer Netflix.
The Blockbuster program works in much that same way Netflix does. For $19.99 a month, subscribers can rent as many DVD movies as they want, keeping a maximum of three at home at the same time.
When subscribers mail the movies back to Blockbuster in a self-addressed, postage-paid envelope, they will receive the next movies they ordered. As a bonus, the company is offering two coupons a month for free in-store movie rentals. About 25,000 DVD movie titles are available, about the same number offered by Netflix.
Netflix offers a three-movie-out program for $21.99 and a two-movie-out program for $14.99 a month.
Both companies also have trial offers. Blockbuster is not new to the online DVD rental business. Two years ago, the company bought a small Mesa-based online subscription service called Film Caddy, which Blockbuster used as a research and development tool. Taking what the company has learned from that experience, Film Caddy has morphed into the Blockbuster.com program, said spokesman Randy Hargrove.
Film Caddy subscribers are being encouraged to sign up with Blockbuster.com, he said. He declined to say how many customers used Film Caddy.
The online industry still represents a small percentage of the $8.2 billion U.S. movie rental business, but it is expected to grow from a total of about 2 million to 6.6 million subscribers overall by 2008. Blockbuster representatives said they can get a good share of that market without taking too much business away from their brick-and-mortar stores. They are hoping that synergies between the two will add to their overall business.
Blockbuster launched a store-based movie subscription program in May, but it required customers to pick up and return the movies at stores. The company plans to combine the online and store-based subscription services in 2005, said Shane Evangalist, general manager of Blockbuster Online.
“If a customer is in our store and wants to return a movie they rented online, we'll be able to accommodate them,” he said. “If a member rents primarily in-store but wants a hard-to-find title we don't typically carry in store, they'll be able to go online and get it.”
Blockbuster has set up 10 distribution centers nationwide to support the online program. Once the two programs are combined, the stores will also serve as distribution points, Hargrove said. Netflix, which operates a distribution center in Tempe, could not be reached for comment Monday.