Blockbuster Inc., the world’s biggest video chain, will let customers who rent movies by mail return them to the company’s stores to compete with Netflix Inc.
Under the program, customers who rent movies over the Internet can return them through the mail or exchange them at Blockbuster locations for free movie rentals, the Dallas-based company said today in a statement. The service starts today.
The company has expanded its Internet rental program as it tries to fend off Netflix, the largest provider of movie rentals via the mail, and new film download services from Apple Computer Inc. and Amazon.com Inc. Blockbuster has closed stores and cut expenses after sales fell for five consecutive quarters.
“It’s a way to say to the consumer that Blockbuster has something to offer for the same money that Netflix can’t,” said Stacey Widlitz, an analyst at Pali Capital Inc. in New York. “It’s a way to ramp up online subscriptions without spending a lot of money and getting more people in the stores.” Widlitz has a “buy” rating on the shares.
Blockbuster’s new service will work because people can impulsively rent movies while Netflix requires planning, said Michael Pachter, an analyst at Wedbush Morgan Securities in Los Angeles. Netflix customers must wait at least two days after watching a DVD to get the next film on their rental list, he said. Pachter rates Blockbuster stock “buy.” Shares of Blockbuster gained 3 cents to $3.95 as of 2:03 p.m. in New York Stock Exchange composite trading. Netflix’s shares rose 17 cents to $27.83 in Nasdaq Stock Market composite trading. Blockbuster lost 9 percent in the past year, while Netflix gained 8.4 percent.
Returning Video to Stores Blockbuster had online subscriber growth, more customers in stores and lower Web subscriber turnover in test markets for the program, Blockbuster Chief Executive Officer John Antioco said today in an interview.
The Total Access program will be available in more than 5,000 of Blockbuster’s 8,500 locations. All current and new Web rental subscribers, including those on the $5.99 and $7.99 monthly plans, will be upgraded, Blockbuster said.
Dropping off a movie to a Blockbuster store will automatically cause the next movie in a Web subscriber’s list to be shipped a day earlier than if the film had been returned in the mail.
Total Access customers will receive a monthly coupon for a free in-store rental. Movies rented through the free in-store exchange or with the coupon don’t count against the total number of DVDs a Web customer can have out at any one time.
Blockbuster said it had 1.5 million Web subscribers at the end of September, 50 percent more than a year earlier, including 100,000 trial subscribers who became paying members. The company added 150,000 subscribers in the third quarter.
Blockbuster’s goal is to have 2 million subscribers by year-end. Netflix said last month it had 5.66 million subscribers.
