Blockbuster Introduces Online Rental Service - Sitcoms Online Message Boards

Janice · 08-13-2004, 11:13 AM

http://www.usatoday.com/tech/techinv...10-video_x.htm

Blockbuster to bust into rent-by-mail DVD business

By David Lieberman, USA TODAY

NEW YORK — No. 1 video chain Blockbuster (BBI) on Wednesday will make its long-awaited move against Web-based rental services led by Netflix (NFLX).

Blockbuster Online will try to one-up its Web competitors by giving subscribers two free rentals each month at its stores, as well as access to 25,000 DVDs sent and returned via the mail.

"We're now spreading our wings," says President Nigel Travis. "Online covers the whole country," while about 65% of the population lives within a 10-minute drive of a Blockbuster store.

Blockbuster Online will follow the same model as other services: For about $20 a month, subscribers can go to www.blockbuster.com and order up to three DVDs to be delivered by mail. Once a DVD is returned in a prepaid envelope, another can be ordered. If a customer has created a wish list, Blockbuster will send the next selection.

Serious cinemaphiles will be able to pay $30 a month to have up to five DVDs at a time, or $40 for eight.

There are no late fees on the mailed DVDs. The usual charges apply to videos taken from local stores.

About half the country will be able to receive DVDs the next day from one of Blockbuster's 10 distribution sites, with two-day service nearly everywhere else, executives say.

They'd identify only New York and Seattle as distribution sites, saying the rest are near major cities. By sometime next year, Blockbuster expects to be able to use virtually all its stores as distribution sites. "We'll let the stores handle hot new releases," says Online General Manager Shane Evangelist.

Blockbuster Online costs about $1 a month more than Wal-Mart's online video rental service and about $2 less than Netflix.

But the Internet upstart, which has 2 million paid subscribers, says that it isn't worried about the video giant.

"Price isn't that big an issue," says Netflix CEO and founder Reed Hastings. "They've got a service that doesn't work as well as Netflix, so if they didn't price it lower they'd get nowhere."

He says the 27 Netflix distribution centers offer one-day delivery to 95% of the country, and it'll take a long time for Blockbuster to replicate Netflix's thousands of customer-written DVD reviews. "There's no community" at Blockbuster, Hastings says.

Wall Street isn't so sanguine. Netflix shares lost more than 45% of their value since mid-July as rumors about Blockbuster's pricing plan began to spread.

But Blockbuster also has a lot riding on its online service. It is trying to revive its mature video rental business and warned investors to expect more red ink this year as it invests in this and other initiatives. It's also in the process of being spun off by Viacom, which controls 82% of Blockbuster shares.

Netflix closed Tuesday at $17.14, up 72 cents. Blockbuster ended at $12.30, down 10 cents.

08-13-2004, 11:13 AM	#1
Janice Retired Admin - Hollywood Swingin' Forum Legend Join Date: Aug 03, 2001 Location: Beantown Posts: 36,388	Blockbuster Introduces Online Rental Service http://www.usatoday.com/tech/techinv...10-video_x.htm Blockbuster to bust into rent-by-mail DVD business By David Lieberman, USA TODAY NEW YORK — No. 1 video chain Blockbuster (BBI) on Wednesday will make its long-awaited move against Web-based rental services led by Netflix (NFLX). Blockbuster Online will try to one-up its Web competitors by giving subscribers two free rentals each month at its stores, as well as access to 25,000 DVDs sent and returned via the mail. "We're now spreading our wings," says President Nigel Travis. "Online covers the whole country," while about 65% of the population lives within a 10-minute drive of a Blockbuster store. Blockbuster Online will follow the same model as other services: For about $20 a month, subscribers can go to www.blockbuster.com and order up to three DVDs to be delivered by mail. Once a DVD is returned in a prepaid envelope, another can be ordered. If a customer has created a wish list, Blockbuster will send the next selection. Serious cinemaphiles will be able to pay $30 a month to have up to five DVDs at a time, or $40 for eight. There are no late fees on the mailed DVDs. The usual charges apply to videos taken from local stores. About half the country will be able to receive DVDs the next day from one of Blockbuster's 10 distribution sites, with two-day service nearly everywhere else, executives say. They'd identify only New York and Seattle as distribution sites, saying the rest are near major cities. By sometime next year, Blockbuster expects to be able to use virtually all its stores as distribution sites. "We'll let the stores handle hot new releases," says Online General Manager Shane Evangelist. Blockbuster Online costs about $1 a month more than Wal-Mart's online video rental service and about $2 less than Netflix. But the Internet upstart, which has 2 million paid subscribers, says that it isn't worried about the video giant. "Price isn't that big an issue," says Netflix CEO and founder Reed Hastings. "They've got a service that doesn't work as well as Netflix, so if they didn't price it lower they'd get nowhere." He says the 27 Netflix distribution centers offer one-day delivery to 95% of the country, and it'll take a long time for Blockbuster to replicate Netflix's thousands of customer-written DVD reviews. "There's no community" at Blockbuster, Hastings says. Wall Street isn't so sanguine. Netflix shares lost more than 45% of their value since mid-July as rumors about Blockbuster's pricing plan began to spread. But Blockbuster also has a lot riding on its online service. It is trying to revive its mature video rental business and warned investors to expect more red ink this year as it invests in this and other initiatives. It's also in the process of being spun off by Viacom, which controls 82% of Blockbuster shares. Netflix closed Tuesday at $17.14, up 72 cents. Blockbuster ended at $12.30, down 10 cents.