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Blockbuster Woos Disgruntled Netflix Subs

McKinney, Texas –


announcement this week that it is separating
and raising prices on its previously combined streaming video and mail-based
disc rental services, drew a few opportunistic counter offers from rival
Blockbuster, which is now owned by the Dish Network.

revealed on Thursday that it is offering “outraged” Netflix customers a special
one-month free trail running through Sept. 15, 2011 at participating stores and
via its web site. The offer applies to its one- and two-  disc-out-at-a- time rental packages.

After the free
trial, customers will continue to receive the Blockbuster Total Access by mail
service for a new $9.99 per month price for “one disc” at a time or $14.99 per
month for “two discs” at a time. Blockbuster also pointed out that it provides
access to new releases up to 28 days or more prior to either Netflix or Redbox,
and offers in-store exchanges for its by- mail rentals for people living near a
Blockbuster brick-and-mortar outlet.

On Tuesday, Jessie
Becker, Netflix marketing VP, posted a new rate change notice on the company’s
website outlining its plan to separate the current combined DVD-by-mail and
streaming video services that had been available at monthly fees starting at
$9.99 per month.

immediately for new subscribers and on Sept. 1, 2011, for existing subscribers,
Netflix will charge $7.99 a month for a one DVD out at-a-time plan and $11.99 a
month for a two DVDs out at-a-time plan.

The now-separate unlimited
streaming plan carries a $7.99 per month (no DVDs) fee. Netflix subscribers can
also elect both the unlimited DVDs, one out at-a-time (no streaming), plan and
the $7.99 a month unlimited streaming plan for a new price of $15.98 per month,
a $6 per month increase over the prior combined plan.

In addition,
Netflix has set up separate management teams to handle DVD by-mail and the
streaming video services.

In a blog, Becker
said Netflix instituted the changes because it had underestimated the level of
demand for DVD rentals after the streaming service was available. The company
only assessed $2 per month for one- disc at-a-time DVD rentals in the prior
$9.99 per month pricing structure.

“Given the long
life we think DVDs by mail will have, treating DVDs as a $2 add on to our
unlimited streaming plan neither makes great financial sense nor satisfies
people who just want DVDs,” said Becker. “Creating an unlimited DVDs by mail
plan (no streaming) at our lowest price ever, $7.99, does make sense and will
ensure a long life for our DVDs by mail offering.”

The announcement
reportedly drew cries of outrage from disgruntled Netflix subscribers, which
Blockbuster seized upon in its latest bid.

Prior to the
Netflix price hike, Blockbuster instituted several other promotional offers to
entice Netflix users over to its service.

Among those were:
a month long pass for $4.99 for kids to rent unlimited kids movies from
Blockbuster stores.

  • Sunday movie rentals for 49 cents at
    Blockbuster stores.

  • In-store rate and daily pricing
    reductions, with thousands of titles available for rent for 99 cents per day
  • Newly released movies were lowered to
    $2.99 for first day. Other newer movies were lowered to $1.99 or less for first
    day, with additional days at 99 cents.

Blockbuster’s By
Mail service enables customers to exchange movies at participating Blockbuster
stores nationwide for another free rental.

customers can visit the Blockbuster website at

or bring a tear-off from a Netflix mailer to a participating Blockbuster store
to register.

pointed out that customers have access to unlimited game titles in stores, in
addition to DVD disc rentals with immediate release windows, unlike Netflix and
Redbox with up-to-28-day release windows on some new titles.

Blockbuster also
offers a transactional on-demand digital download service on over 125 different
CE devices from set-top boxes t PCs and mobile phones, offering rentals and
sales of digital movies and TV shows. It does not offer a subscription-based instant
streaming movie service comparable to Netflix at this time, but the Blockbuster
on Demand system enables playback via streaming and download, depending on the
device in use.

Blockbuster does not offer a combined subscription for its
on demand and By Mail service today. According to Kevin Lewis, Blockbuster’s
chief marketing officer, the separation of its digital download and
disc-by-mail programs is necessary due to the transactional model for the
download service (in contrast to a subscription streaming model), which allows
Blockbuster to access movies with the earliest release windows.