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Online DVD rental war heats up with price drops

Written by Rich Fiscus (Google+) @ 23 Jul 2007 11:19 User comments (17)

Online DVD rental war heats up with price drops Netflix has announced a price decrease of $1 per month for its two most popular plans. The 3 DVD at a time plan will drop to $16.99 a month, while the single disc at a time plan will be $8.99.
The cuts, which match rival Blockbuster's online only plans, are the second this year. Earlier in the year the price for the two DVD per month and two disc at a time plans also dropped $1.

Acknowledging Blockbuster has been eroding its market share, Netflix in April warned Wall Street that it won't add as many subscribers this year as it originally envisioned. The company has added 4.5 million subscribers since lowering the price of its 3-DVD plan from just under $22 in November 2004. The company is also making a lot more money, with earnings of $49 million last year compared to a $6.5 million profit in 2003.

Last year Blockbuster added an option for subscribers to pay an additional $1 per month, in return for which they can return movies to Blockbuster's traditional brick and mortar rental outlets and even pick up some movies from those stores. Online rental has at least a two day turnaround time as discs have to be sent and received through the mail.

Netflix countered with a small, but growing, selection of movies that can be streamed from their website.

After a loss of $49 million in the first quarter of this year, Blockbuster has said they will be modifying their service ``to strike the appropriate balance between continued subscriber growth and enhanced profitability."

Source: ContentAGENDA

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17 user comments

123.7.2007 11:39

I was thinking about going with one of these online plans. Are most people happy with netflix?

223.7.2007 12:04

I refused to go with Blockbuster becuase they are the Anti-Christ. So I went with Netflix, I was pretty happy with Netflix. But toward the end of my time with them the movies started coming later and later. It started out i mail them and got only a 1 day gap till i got my next movie. a year later I sometimes waited 2 or 3 days even between. That's too long, and they need to tighten it up if they want to wrangle with Blockbuster. I also thought they'd do even better if they bought Gamefly and incorporated that into their product.

323.7.2007 12:14

As a former manager in video store chains for 5 years, I have to say that every year the video rental business model is in decline. The model itself was marginally profitable in the days when VHS was king, as stores like BlockBuster would receive "Movie A" weeks in advance before retailers were able to sell them. (Remember movies taking years to get to PPV, HBO, then network TV?)

The DVD era shattered the typical rental store business model. DVDs began to sell on the same "street date" as you could rent them, and at an affordable cost, a consumer could own the movie for little more money than what it costs to rent them.

Even the "Previously Viewed" money making scheme had been tarnished, as BlockBuster, Hollywood and others could make back a large part of their initial cost by selling overstock of a movie at a price comparable to what the chain originally paid a distributor for it. (VHS tapes were sold at a much higher premium by the distributor, to the chain, however, when a movie was released for rental before it's actual retail "street date".)

Although the Blockbusters of the world could now stock more DVD movies, they also had the dilemma of having to raise the cost of the rentals in order to keep in line with their operating costs. All you have to do is look at ANY of the chains and see that they are all in financial trouble.

Netflix gains an upperhand by keeping all of their inventory in one centralized warehouse and using a website as their storefront, while collecting a streaming revenue and advertising "no late fees."

Blockbuster is trying to recoup some of their cost by entering the online world, however, they still may have a dozen stores in one market that Netflix can service with ONE warehouse. Blockbuster can create a faster turnover time with their brick and mortar stores, which has lured some customers over to their side.

If you've read this far, you may be able to agree with me when I say that traditional, stand-alone, movie rental stores may soon become a thing of the past.

423.7.2007 12:15

im happy with blockbuster online only because i was grandfathered in to two free monthly game rentals with my plan.

for 22 a month i usually get about 12 movies and 2 games, new realeases that i keep for the month. almost like a second gamefly.

523.7.2007 13:57

isn't this old news, I could've sworn I heard this already...

623.7.2007 16:23

I am very happy with my Blockbuster.com and in store service, despite all the horrible things I see written about them here. The movies come quickly, and as soon as I return one to the store it is listed as returned on my online queue and another is mailed. They could be more efficient with the speed of stocking Blu-Ray and HD-DVDs, but that will come in time.

Also, Netflix is fine, too. I had them and was very happy. I switched because of Blockbusters in store offers, not because Netflix was doing something wrong. My Dad has Netflix and thinks they are a little faster in delivery than BLockbuster. Also, it was mentioned that Netflix has only one centralized warehouse. They have warehouse sites all over the nation.

723.7.2007 16:47

I have had netflix for a few years now and have no complaints. I have also had blockbuster for a number of months to try it out and because at the time, they had a few titles i couldn't get from netflix. (Netflix has all of those titles now) Blockbuster's service was okay, just not as refined as Netflix. Getting in-store coupons from blockbuster just made me feel that i had to go to the store and use it just to get my money's worth. Not wanting to go to the store was the reason i started these services in the first place, so this seemed a little backwards.

Originally posted by jookycola:
I refused to go with Blockbuster becuase they are the Anti-Christ. So I went with Netflix, I was pretty happy with Netflix. But toward the end of my time with them the movies started coming later and later. It started out i mail them and got only a 1 day gap till i got my next movie. a year later I sometimes waited 2 or 3 days even between. That's too long, and they need to tighten it up if they want to wrangle with Blockbuster. I also thought they'd do even better if they bought Gamefly and incorporated that into their product.
I went through this phase too, awhile back with netflix, where the delivery dates were getting longer and longer. This was due to the fact that they were opening additional depots in my area. during that time they routed all of my movies through depots that were not as close as my usual ones. after a month or two this subsided and once the new depot was fully stocked, i got all of my movies from there and it was crazy fast.
I totally agree about the Gamefly thing. They have always ripped off almost the entire look and feel of the netflix site since day one. yet there is no service to back it up. I tried it a while back without knowing beforehand that they only have one depot in the US!! now they have doubled that!! oh wait.. that still means they only have two, one on each coast. It can take about 5 days for both ways for each game if you live closer to the center of US. However, if netflix integrated these games into their depots, that would be the best deal ever. Oh and the free Watch Now feature on Netflix works really fast. Once they get some more titles on it, i'm sure that will be another huge draw over blockbuster.

823.7.2007 17:15

Originally posted by loxley32:
Also, it was mentioned that Netflix has only one centralized warehouse. They have warehouse sites all over the nation.
Guess I wasn't clear enough: Netflix has many warehouses, but they are strategically positioned to service multiple markets (.ie Cleveland and Pittsburgh services parts of the Midwestern U.S.) I'm amazed by some of the places the more obscure DVD's arrive from (Oregon?)

923.7.2007 18:47
2colors
Inactive

I don't see how you can compare Netflix to Blockbuster. I get 3 in the mail watch them take them down the street swap for 3 new releases. And end up getting twice as many movies than I was getting from Netflix. Older movies online new releases in the store what more can you ask for. Blockbuster gets my vote.

1023.7.2007 18:58

lets not forget about netflix vod

1123.7.2007 22:41

Quote:
After a loss of $49 million in the first quarter of this year, Blockbuster has said they will be modifying their service ``to strike the appropriate balance between continued subscriber growth and enhanced profitability."
We will just have to wait and see what that is exactly.

1224.7.2007 4:54

Originally posted by jookycola:
But toward the end of my time with them the movies started coming later and later. It started out i mail them and got only a 1 day gap till i got my next movie. a year later I sometimes waited 2 or 3 days even between.
Want to know why... Google "Netflix throttling" and you'll get your answer.

I, too, use to use Netflix. I'd get the movies in the mail, watch them that night, and send them back the next day. It didn't take long before their 2 day turnaround turned into 4-5 days. And I'd ship back 3 movies at the same time yet they "wouldn't receive them" :/ at the same time and stagger the shipping on the next movies in my q. I dropped them after only 5 months.

They advertise "unlimited" rentals. But if you make a habit of trying to get you moneys worth (receive/ship back next day) then you'll find out quickly how crappy they can be.

1324.7.2007 5:12
jumpgrid
Inactive

Hard to say which one is better there just different. Blockbuster, can give you quantity. Netflix, more quality, but I've gotten a few scratched up discs. I say interchange them, GO with Netflix for a while put the account on hold, and then switch to Blockbuster for newe releases and in-store exchange.

CJ

1424.7.2007 9:43

Netflix is great. I get a two day turn around. Basicaly return on Monday and receive by Thursday.

Wonderful selection of films that are often impossible to find at video stores. The selection alone is what makes the service worth while. I still occasionaly rent from the brick & morter, but that is not the norm.

I do wish that they would also rent PAL and other harder to find films that are available in Europe but not here. Of course, there is the region code. No way around that is there? ;-)

The number of brick & morter stores will diminish, but will not disappear altogether, imho. There are now way too many Blockbuster video stores to remain competetive for a public company. The mom & pop stores that cater to special markets will do OK. There is one video store down the road from me here that rents VHS and Laser that are very hard to find. They draw from many miles for that reason. They're not getting rich, but they are doing what they like.

Cheers...

1524.7.2007 10:48

Netflix is way better overall basically due to the fact you can get just about anything from them. Badbuster doesn't even come close to offering the amount of movies Netflix carries. Also Netflix web site is much better then Badbuster. Either will sit on your selections if you turn movies around fast, I guess they are worried about ware and tear on their discs. Its nice being able to go to the store and pick up a new release but how often is there a good one to get, which is the only way to utilize that feature. One thing I learned early about Netfilx is DON'T use their email support for anything other then there prefab'd situations always call for help if you have a major problem, I don't think the email support personal know how to read or comprehend a problem.

Today I heard Blockbuster is now lowering their service a buck due to Netflix's price drop, maybe next month they'll drop another buck.

It's really nice to see both Blockbuster and Hollywood Movies get beat up by a competitor after they bought out or drove many other better Video stores out of the business.

1624.7.2007 16:06
jumpgrid
Inactive

Netflix absolutely has better selection. I mean its so one-sided its unbeleivable. But Netflix isn't so good with New Releases. ANd although you can get anything, I've gotten a lot of old movies that look like they've been used for coasters at every bar in New York; that's not Netflix's fault all the way, but there is a trade off. I've used the Blockbuster in-store exchange and the amount of movies that I got, with some old ones, was astounding. Another feature that people might not know about Blockbuster, is that on some movies you have the option to pick between different versions of a dvd. You could pick the Special Edition, or the Collector's Edition, thats very cool. Trust me, I hate blockbuster, but I got to admit they're online package isn't that bad. I feel both Nflix and Bbuster have strengths and weaknesses.

1724.7.2007 17:04

I love Netflix. Been with them for over 2 years, still get a day or two turn-around. Looking at my rental history with Netflix I average out to about 15-18 movies a month (with the 3-at-a-time plan), so that equals out to about a $1 a movie.....not bad in my opinion.

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