Blockbuster (NYSE: BBI) dropped off its answer to Netflix's (Nasdaq: NFLX) subscription service. Now, the struggling Blockbuster, a unit of Viacom (NYSE: VIA), will offer its own similar deal, through which movie watchers will pay a monthly charge for video rentals without the late-fee pressure. Who's gonna knock whose block off here?
It's no secret that Blockbuster makes a good deal of money because of the late fees it charges when lazy, busy, or otherwise preoccupied customers don't get their flicks back in time.
The advent of the DVD format has brought a lot of opportunities to shake up the once-lucrative video rental industry. Earlier this week, McDonald's (NYSE: MCD) said it's expanding its test of video rentals of top new releases -- and that's exactly Blockbuster's forte.
In further trouble for Blockbuster, rent movies at McDonaldLand and you can return your videos to any participating McDonald's, not just the one you rented it from (and that inflexibility in rental return is likely another reason Blockbuster made money hand over fist in late fees).
In my opinion, though, Blockbuster's new subscription service already shows how much it doesn't "get it," considering the fact that it still requires customers to pick up and drop off their films at the stores. And maybe this just isn't the time, when people are feeling squeezed for time and gas money.
To its credit, Blockbuster does plan to expand the service to include Internet reservations and mail order this year. Mail order was the differentiator that helped catapult Netflix into a movie rental sensation.
Blockbuster's subscription service, called Movie Pass, is going for a slight premium. It requires that consumers pay $24.99 a month to keep two movies at a time out, or $29.99 to have three films out at any one time. That compares with Netflix, which charges $21.99 per month to pile three movies on top of the TV for when you have time to spare.
On the one hand, this move may help Blockbuster to retain some of its defecting clientele, and it may hurt Netflix's growth plan as well as suffering video rental concern Hollywood Entertainment (Nasdaq: HLYW). Maybe.
On the other hand, though, heck -- Blockbuster is super late to crash this party, and with a premium price to boot. The time for this innovation is over: Netflix already shook things up, creating a new industry standard in what DVD renters desire, and is now moving on to what many believe is the celluloid future. Blockbuster may be catching up, but the company that wins is the one that stays several steps ahead.
Netflix was once on the
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Alyce Lomax does not own shares of any of the companies mentioned.
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