Netflix markets download availability, Blockbuster limits plans
UPDATE: Moves have impact on stocks
By Cindy Spielvogel and Jennifer Netherby -- Video Business, 8/10/2007
AUG. 10 | Engaged in a fierce market share battle with Blockbuster and its Total Access plan, Netflix has taken to promising more movies with its plans through its Watch Now streaming service.
Over the first weekend of August, Netflix ran ads on Yahoo! and other sites promising “5 movies for $5” for its $4.99 monthly plan, which offers subscribers two DVD rentals and three online movies a month through the retailer’s Watch Now streaming service. That plan offers five hours of online viewing time, which spokesman Steve Swasey said works out to roughly three movies.
Two weeks ago, the online rental retailer slashed the price of its movie plans as a way to combat Blockbuster, bringing Netflix pricing down to the same level as Blockbuster by Mail. Blockbuster introduced Blockbuster by Mail in June as an online-only subscription plan priced lower than the Total Access online/in-store service and hasn’t lowered the pricing for that service since.
Blockbuster, Netflix stocks affected
Financial paper Barron’s predicted that Netflix’s stock would jump once Blockbuster raises prices on its plans. Blockbuster effectively raised prices July 26, the day of its second-quarter conference call, by limiting Total Access in-store rentals and introducing Total Access Premium, which is priced $7 higher than Total Access.
Blockbuster’s credit rating was downgraded by Moody’s Investors Service after the retailer failed to meet Wall Street’s earnings expectations for the first two quarters. Blockbuster’s stock fell Aug. 6 from $4.19 to below $4 early in the day but ended the day at $4.11. Netflix stock went from $16.57 to $16.96.
Confusion over Blockbuster plans
Meanwhile, Blockbuster has confused the media, store employees and subscribers alike with its recent changes to its Total Access pricing, which was raised for subscribers who want unlimited in-store exchanges.
Apparently, depending upon how heavily they use the service, some existing subscribers are being offered the opportunity to be grandfathered in under their original plan while others are not.
Blockbuster spokesman Randy Hargrove wouldn’t say exactly which subscribers are being affected “for competitive reasons,” revealing only, “We’re trying to match subscribers with the plan that seems to best fit their needs based on their rental history.”
E-coupon gone, game discount still offered
Hargrove also indicated that Blockbuster's monthly e-coupon is being phased out.
“We eliminated e-coupons from our subscription plans offered after July 26, 2007,” he said. “Some existing subscribers to prior plans continue to receive e-coupons at this time.”
Although Total Access subscribers may no longer be getting the monthly e-coupon for a free movie or game rental, they will be offered in-store game rentals at a discount.
“For online subscribers to our Blockbuster Total Access and Blockbuster Total Access Premium plans, the discounted game rental is $4.99,” compared to $7.99 for a regular game rental, Hargrove said.
Although the online-only Blockbuster by Mail plan doesn’t include the discount game offer, Blockbuster by Mail subscribers will now have the option to return their online rentals to stores and exchange them for $1.99 movie rentals, he said, as will Total Access subscribers.
