Blockbuster changes Total Access terms after loss
By Cindy Spielvogel -- Video Business,07/26/2007
JULY 26 | Blockbuster reported a $35.3 million second-quarter loss and made a move toward improving profitability by changing the terms of its Total Access program, limiting the number of in-store exchanges a customer can make before being charged more.
Blockbuster is emphasizing the limit to five in-store exchanges per month for its most popular plan, the unlimited online rentals of three movies out a time for $17.99.
But if a customer wants to stick with unlimited in-store exchanges, the price leaps to $24.99, according to the company’s Web site, effectively a $7 price hike. That plan is now called Total Access Premium.
Analysts had been expecting a price hike, but the shift to an in-store exchange limit emphasis was largely a surprise.
James Keyes, Blockbuster’s new chairman and CEO, was somewhat vague about the term changes during the company’s conference call with analysts on second-quarter results, as was a press release on the changes issued shortly after the call.
Rather than characterizing the modifications as a price hike, Keyes stressed the limit on in-store exchanges. If a customer on the $17.99 plan wants to make more than five in-store exchanges per month, an additional $1.99 per rental will be charged, he said. Customers who subscribe to the online-only Blockbuster by Mail program also will have that option, he said.
According to the press release, customers will now be able to exchange their online rentals for discounted in-store game rentals in addition to movies. Previously, Total Access members had the option to get one free game rental per month through a once-per-month coupon.
Blockbuster announced it increased its subscriber count by 600,000 in the second quarter to a total of 3.6 million subscribers, more than 3.3 million of them paid. Netflix, in contrast, lost subscribers during the quarter for the first time.
But Blockbuster’s subscriber increase came at a cost of about $50 million in the quarter, chief financial officer Larry Zine said.
Blockbuster will now suspend its marketing spending on the online program, according to Keyes.
Changes ahead
In presenting an overview of what he expects for the company in the near term, Keyes said he sees “opportunity” in Blockbuster. He plans to develop ways to meet consumers’ changing preferences for the ways they receive entertainment, making it more convenient for them.
Keyes plans to draw on his experiences at his former company, 7-Eleven, in using technology to tailor each store for increased product turnover and possibly add new products as well. As an example, he noted that a Blockbuster franchisee successfully capitalized on Harry Potter mania by selling the new book in the series.
Blockbuster will look at partnering with studios on ways to provide consumers with entertainment, Keyes said. Most of Blockbuster’s business, about 70%, involves revenue sharing with the studios, he said, although he didn’t divulge details of any specific deals.
He also admitted that the video-on-demand tests being conducted between studios and Comcast in Denver and Pittsburgh have had enough of an impact on Blockbuster stores in those cities to warrant Blockbuster’s monitoring, but he said the company isn’t ready to reveal the results of its evaluation yet.
Keyes also said he believes Blockbuster can operate with smaller footprints and indicated that as more competing stores close, existing Blockbuster stores will gain some of their revenue.
Although the quarter’s results were down, Blockbuster continues to gain market share both in-store and online, added Zine.
Revenue down
Blockbuster reported a 2.8% decline in total revenue for the quarter to $1.26 billion from $1.3 billion for the same quarter of 2006. The net loss of $35.3 million compared with net income of $68.4 million in the preceding year’s second quarter.
Worldwide same-store revenue was down 1.3% from last year’s second quarter. The company ended the quarter with 7,878 stores worldwide.
Zine said a weaker film slate was partly to blame for the drop in second-quarter revenue, along with store closings and the sale of the company’s 217-store Game Station chain in the U.K. Blockbuster expects the release schedule to improve in the second half, particularly in the fourth quarter.
Zine said second-quarter in-store rentals, without the online business factored in, probably were down around 10%, but he stressed that the figure needs to be considered in the context that many in-store renters were converted to online subscribers.
He said in-store traffic is up, largely because of in-store exchanges by Total Access members. And the vast majority of the company’s online subscribers use the Total Access online/in-store program rather than the new lower-priced, online-only Blockbuster by Mail, he said.
Total Access terms
Other changes in Total Access terms, now posted on Blockbuster.com, include the following: unlimited rentals of two DVDs out at a time for $14.99 now have a limit of three free in-store exchanges per month; unlimited rentals of one DVD at a time, $9.99 per month, limit of two free in-store exchanges; one DVD at a time, two per month, $7.99, limit of two free in-store exchanges.
Prices for the newly named Total Access Premium for unlimited exchanges are $24.99 for unlimited rentals of three out at a time, $21.99 for unlimited two at a time and $16.99 for unlimited one at a time.
Blockbuster’s stock price rose 2¢ in morning trading, from $4.17 to $4.19.
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| Submitted by: | Melisa W 10/20/2007 4:26:18 PM PT |
| Location: | Tampa |
| Occupation: | Customer Service Trainer |
I am so pissed that Blockbuster pulled this bait and switch act on us! I refuse to pay more for what I signed up for. This price hike should have applied to new customers only! Blockbuster always makes these stupid knee jerk decisions that are not well thought out. I refuse to accept this price hike, and immediately canceled my service with them. I will just stick to cable.
| Submitted by: | John Wilkinson (jw87c@yahoo.com) 10/3/2007 4:42:21 PM PT |
| Location: | Sacramento, CA |
| Occupation: | Education |
The turn around time for my blockbuster has become longer and longer. When I first signed up, it was three days: return DVD in store on Monday, DVD mailed out on Tuesday, and get a new movie on Wednesday. With free unlimited in store exchange, I couldn't be more happier. I have recommeded it to everybody I know.
Now it's a different story. The turn around time has become 5 days or worse. If I return a movie on Friday, a new one will not be mailed out until next Tuesday, and it will arrive at my door on the next Thursday! From the return envolope, the distribution center is within 20 miles from where I live, and a 5 - 7 days turn around time is just ridiculous.
Now they are going to limit the amounts of in-store exchange? I don't see a single reason that I should stick to blockbuster. For Netflix, you have $16.99 for 3 movies plus 17 hours of instant movie downlad. Plus, you are going to save the gas, the time, and the inconvenience of in store exchange. So, Adios, Block Buster.
| Submitted by: | Bob Nellis 9/24/2007 10:42:16 PM PT |
| Location: | Phoenix, AZ |
| Occupation: | News Anchor |
We dropped Netflix just so we could use the in-store exchanges. We have already stopped Blockbuster online and went back to Netflix.
| Submitted by: | Sean 9/20/2007 11:17:05 PM PT |
| Location: | Kansas |
Regardless whether or not customers are getting a better a deal through Blockbusters Total Access opposed to Netflix. The issue here is, that Blockbuster is penalizing existing customers currently on the $17.95 Total Access Plan with the expecation that this practice is ok. Not so fast. Consumers have long battled service providers over that small print down at the bottom of their service agreements. If Blockbuster wants to modify their service plans, why can''t they just offer it to new customers? Why penalize their existing members and make them pay more for less? Thats just not right. When I signed up for Total Access, I expected 3 mail out movies , unlimited in store rentals, and a once a month e-coupon for a free game or movie. Thats what I signed up for, thats what I should get. It''s not ok to change the parameters of a service agreement and expect the customer to bo ok with that. Sure it''s not a contract, but customers like myself are fed up with companies who exploite their right to manupliate service agreements, raise their fees and degrade customer expectactions.
| Submitted by: | Sean 9/20/2007 11:16:27 PM PT |
| Location: | Kansas |
Regardless whether or not customers are getting a better a deal through Blockbusters Total Access opposed to Netflix. The issue here is, that Blockbuster is penalizing existing customers currently on the $17.95 Total Access Plan with the expecation that this practice is ok. Not so fast. Consumers have long battled service providers over that small print down at the bottom of their service agreements. If Blockbuster wants to modify their service plans, why can''t they just offer it to new customers? Why penalize their existing members and make them pay more for less? Thats just not right. When I signed up for Total Access, I expected 3 mail out movies , unlimited in store rentals, and a once a month e-coupon for a free game or movie. Thats what I signed up for, thats what I should get. It''s not ok to change the parameters of a service agreement and expect the customer to bo ok with that. Sure it''s not a contract, but customers like myself are fed up with companies who exploite their right to manupliate service agreements, raise their fees and degrade customer expectactions.
| Submitted by: | c davis 8/18/2007 10:01:22 AM PT |
| Location: | florida |
| Occupation: | PAYROLL |
This is absolutely ridiculous I have been a blockbuster online customer from the very beginning and all you have done is lower our service and raised our prices I absolutely refuse to go along with this. If this indeed is a change that takes place I will have no choice to leave your service and join net flicks on principle alone. How is it possible that you feel you can so dramatically raise these prices and keep your customers. I don't know how everyone else is going to take this but as for me I am outraged. I have dealt with your increases in the past but this is a $4 dollar a month increase. I use blockbuster online because my family of five is hard to get a weekend of enjoyment for an affordable price. Our movie nights Friday and Saturday are the main ingredient in the stew that keeps my family thick. I know your big corporate rich board members could give a rats butt about my family situation but maybe they need to recall that it was your company's family values that brought many customers away from the small mom and pop video store where the children could by chance come across some very undesirable material. Now that you lead the idusty in this field you decide forget the little people that were loyal to you and lets make the big bucks. I am so sick of big company's like you selling us struggling working class people out, so that all the high on the food chain owner's. officer's and board members can afford there multimillionaire lifestyle.
| Submitted by: | Jane Doe 8/9/2007 6:41:42 PM PT |
| Location: | Carpinteria, CA |
| Occupation: | Ex-Blockbuster Employee |
I'm an ex Blockbuster employee and all and all this is the worst company I have ever worked for. They scam their customers and penalize their employees for customers mistakes and point the finger at employees for theft in the store. I am so happy to quit and will go back to netflix and rent my movies at the mom and pop place across the street. I hope many people follow suit and Blockbuster will have to close doors.
| Submitted by: | Anna B. (sugarbumswife@yahoo.com) 8/3/2007 4:18:15 PM PT |
The ONLY reason why I left Netflix was because of the in-store exchange at Blockbuster. I felt stupid paying the monthly price of $18 at Netflix when I could pay the same for Blockbuster and get more movies. Er. Then the time and gas I wasted to go to Blockbuster, minor inconvenience. But pay more? New customers should accept the new terms, not previous or current customers, THIS IS NOT WHAT I SIGNED UP FOR. Toodles Blockbuster!!
p.s. Thanks to Blockbuster being every half mile around here (there''''''''s even two right across from each other where I live!) all the good ol'''''''' mom and pops places went out of business. But did Blockbuster care about them? Of course not. I agree that there is no decent place to rent DVD''''''''s anymore.
| Submitted by: | Tig Gal 8/3/2007 3:03:14 PM PT |
Can't say I've had a good experience with Blockbuster. Blockbuster is slow to ship and you never know what movie you are going to get from your list. Netflix is dependable, fast, new lower price and online movies. You have to ask yourself;Why stay with Blockbuster??
| Submitted by: | Jason Wood (creatoars@yahoo.com) 8/1/2007 5:10:59 PM PT |
| Location: | Lafayette, CA |
| Occupation: | Video Store Owner |
Why don't all of you just ask for Netflix or Blockbuster to pay you to rent so they can have you as a customer, since it is so expensive. Besides its your own fault. It is obvious that both services just want your money not your business. Do the math how long did you think that unlimited movies would last. To bad there aren't many video stores left that actually want your business and have a good selection.
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