Blockbuster might hike rental fees to support upgrades

Blu-ray represents less than 5% of rentals, financial chief says

By Danny King -- Video Business, 9/23/2008 6:54:00 PM

SEPT. 23 | Blockbuster might continue to raise prices on its in-store rentals as it tries to boost sales, stock more Blu-ray discs and support upgrades to about 7% of its stores, the company's financial chief said at a conference today.

The company's average gross rental price rose about 5% to $4.37 in the second quarter from $4.17 a year earlier, which, along with more merchandise sales, helped Blockbuster boost revenue per customer visit by 21%, Blockbuster chief financial officer Thomas Casey said at the Thomas Weisel Consumer Conference in New York Sept. 23.

The largest U.S. movie-rental chain, which is planning about $130 million in capital expenditures this year, will spend about $20 million upgrading about 500 of its approximately 7,600 stores with items such as lighting improvements, flat-screen TVs and Blu-ray Disc kiosks. While Casey didn't specifically say the price hikes would continue, "it's reasonable and fair to understand that for what costs us more money, we should charge more," he said.

Blockbuster has been trying to compete with companies such as Netflix and Amazon.com while augmenting its in-store sales with Internet-ordering services such as the Total Access program it launched in late 2006 and its Movielink video-download service. Movielink was integrated into Blockbuster's Web site in July, almost a year after Blockbuster bought the service from the five major studios for $6.6 million.

Blockbuster also is looking to build revenue from Blu-ray discs, which account for less than 5% of the chain's U.S. rentals. Casey echoed CEO James Keyes' comments earlier this year that the company was trying to get studios to share Blu-ray inventory-stocking costs with Blockbuster in order to help push the high-definition format.

"You have to figure out new ways to be fully in stock on Blu-ray because of the [higher] wholesale price," Casey said.

Last month, the company, which had 3.2 million subscribers at the end of the second quarter, said that quarter's revenue increased 3.3% from a year earlier to $1.3 billion as U.S. same-store sales rose 14%. Blockbuster’s second-quarter net loss widened 33% on a year-earlier gain from its sale of GameStation.