December has brought about more desperate moves from Blockbuster (NYSE:BBI). I can't say that offering free movies to Netflix (NASDAQ:NFLX) subscribers who bring in the tear-off address sheets from their red Netflix mailers sounds anything but. Bringing what most of us usually consider "trash" into Blockbuster is a strange turn of events indeed.
When I read about the promotion, I couldn't help but recall a fake news article from satirical website The Onion back in September. The site posted a mock Blockbuster article with the following headline: "Struggling Blockbuster Eliminates Rental Fees." (Do read it -- it's hilarious -- it envisions a strategy where everything's free at Blockbuster.) And as with most things that are funny, the grain of truth is difficult to deny as Blockbuster has had a mighty struggle on its hands since Netflix swooped in and changed the game.
From Dec. 5 through Dec. 21, folks bearing the Netflix tear-off sheets can go into Blockbuster and get a free movie rental. They will have to sign up for a free Blockbuster membership. And of course, what does the customer care if he or she is signing up for a free account? Increasing membership this way doesn't necessarily translate into revenues for Blockbuster.
Blockbuster's move might just give Netflix a few easy weeks with reduced volume, but I can't help but think any effect will be negligible. I doubt Netflix subscribers will defect just because they relived the past experience of going into a Blockbuster store (isn't that a big part of the reason why most of them moved to Netflix?). They can probably get a new release more quickly this way then being patient with Netflix's sometimes long wait times (which I think isn't such as big a deal as Blockbuster might think it is, considering the fact that Netflix has a vast repository of great movies far above and beyond new releases and Hollywood hits).
Blockbuster's attempts to lure customers back into the stores to experience its Total Access plan (which longtime Fool Rick Munarriz pointed out is a brazen bet) is the name of the game here. It's not hard to imagine most Netflix subscribers are done with Blockbuster, though.
Netflix may face increasing pressure from competitive forces, like the nascent video downloading market and the fact that it's being offered through Apple's (NASDAQ:AAPL) iTunes, Amazon.com (NASDAQ:AMZN), or even upstarts like BitTorrent. However, I think it's safe to say that when it comes to the competitive landscape of the future, Blockbuster's not even really on the radar.
A promotion like this is one where consumers get the better end of the deal, that's for sure. (And incidentally, CNET pointed out the interesting timing in Netflix's issuing limited edition mailers featuring artwork from celebrities to promote Martin Scorsese's nonprofit, The Film Foundation. Who sounds like the leader here again?) Blockbuster's move just shores up the image of the complacent giant being bested by an innovator.
For more on Blockbuster, see the following Foolish articles:
- Rick Munarriz looked at Blockbuster's most recent quarter.
- He also examined what he believed was Blockbuster's brazen bet.
- Anders Bylund nominated Blockbuster as a Foolish Trick for Halloween.
Netflix and Amazon.com are Motley Fool Stock Advisor recommendations. To see what other companies David and Tom Gardner have recommended as great long-term investments, click here for a 30-day free trial.
Alyce Lomax does not own shares of any of the companies mentioned.
