Blockbuster Lowers Subscriptions Rates

Blockbuster is offering lower-price plans for its Web rental service to steal business from online video rental star Netflix.

The Dallas-based Blockbuster is cutting prices $1 a month for customers ordering movies online just a month after the company’s CEO suggested raising prices.

Price Pressures

Industry insiders are predicting Netflix may be forced to reduce subscriptions rates in an industry expected to grow more than 40 percent this year.

“Whether it is on demand or going online, or going to an actual store, people’s thirst for movies is continually growing and now they have even more choice with how they access the entertainment,” Mukul Krishna, global manager of digital media practice at Frost & Sullivan, told the E-Commerce Times.

Those choices put pressure on companies such as Blockbuster, which must continue to find new ways to compete.

“Online video and services like on demand are giving consumers the ability to say ‘I want to see that movie right now,'” said Krishna. “Blockbuster needed to offer some new incentives.”

A Dollar Less

Blockbuster will now offer a new plan allowing customers to place online orders to rent three movies at a time for $16.99, a dollar less than its previous top-tiered offering, called Total Access. The movies are mailed to the customer.

Blockbuster also has a $4.99 deal for up to two online rentals per month, which is putting pressure on NetFlix to create a new price plan, according to Krishna.

Netflix charges $17.99 for a three-out-at-a-time plan, and it has begun including movies streamed over the Internet for customers with high-speed access and a Windows-based computer.

Although Netflix does not operate brick-and-mortar stores, it got the jump on the Internet movie subscription business and mail delivery of DVDs, pushing past the more established Blockbuster, Krishna explained.

Blockbuster has 3 million subscribers, according to the company. Netflix said it has reached 6.8 million subscribers but recently cut its year-end subscriber forecast to 7.3 million to 7.8 million from its January outlook of 8 million to 8.4 million.

Blockbuster is losing money on the online business, but says it will be profitable next year as orders rise.

After the Blockbuster announcement, company shares rose more than 8 percent.