#online dvd rental
Netflix declines Blockbuster s latest invitation for a price war. Is
by Fred Locklear – Dec 23, 2004 8:11 am UTC
Apparently Blockbuster is having trouble gaining a foothold in the online DVD rental business. After launching a rival service to Netflix in August, Blockbuster soon started a price war to bring rental subscriptions down to the
US$18 mark. Even though Blockbuster’s service was priced slightly lower, that apparently was not enough to spur new subscriber interest and take a bite out of Netflix’s customer base. Now, with an additional threat of Amazon.com looking to join the online DVD rental fray, Blockbuster has slashed an additional US$2.50 off their online subscription, bringing the price down to US$14.99 a month.
Sensing a weakness in the competition, Netflix immediately announced they would not match the price cut and their subscriptions will remain at US$17.99 a month. Coupled with the recent announcement they will eliminate late fees for in-store rentals, the price cuts may signal deep troubles within the movie rental giant. On the other hand, it may be a sign they are expecting a huge windfall from selling customers DVDs and games that are over two weeks late. Blockbuster will retain their no late fee scheme with online movie rentals (monthly subscriptions will still apply).
While the price cut makes sense for competing with Netflix and Wal-Mart, it makes their in-store Movie Pass subscription less and less attractive. Blockbuster’s Movie Pass subscriptions will remain at US$24.99 a month for two rentals out at a time, and US$29.99 for three out a time. If in-store subscribers and regular renters start to flock to their lower price online rental service (without late fees), Blockbuster would need to significantly increase new online rental subscribers to offset the revenue loss. Could the next Blockbuster press release announce a partnership to add paid advertisements at the beginning and end of movies?