Blockbuster Online to Raise Prices?

Allen and another reader took a Blockbuster Online survey that asked them about how they felt about higher prices and about having two different online plans. Allen writes:

"Have you heard of this poll yet? The basic gist of the survey was "How would you respond if we started charging you extra to have the Total Access feature? I am on the $9.99 a month plan for 1 movie at a time. The survey suggests the price for this plan with Total Access would be $14.99. I told them I'd probably cancel because of a reduction in value of the plan.

The suggestion was that their might be Total Access plans and new mail only plans called Blockbuster by Mail."

Update: Dan sent in a screen capture of the prices from the survey:

Full text of the price increase e-mail from the survey, and information about the "Mail Only" plan after the jump.

Another reader sent in the text from the survey:

You may be aware by now that all BLOCKBUSTER Online members have recently received a complimentary upgrade to the new BLOCKBUSTER Total Access™ program, which allows them to return online rentals by mail or at a BLOCKBUSTER store, where they can also be exchanged for free in-store movie rentals.

BLOCKBUSTER Online has been exploring different ideas of how to meet the needs of members who can not take advantage of the BLOCKBUSTER Total Access program for one reason or another.

One of the ideas is to offer Mail-Only plans, which would allow members to receive and return DVDs only by mail, without the option to return them at a Blockbuster store and exchange them for free in-store movies.

At the same time that the Mail-Only plans are introduced, BLOCKBUSTER Total Access may also experience price changes to reflect the added value that this program represents compared to the Mail-Only options.

The next section will show an email that BLOCKBUSTER Online members may receive if these changes are introduced. Please review it carefully and answer the questions that follow.

Here's the text of the announcement e-mail from the survey:

Dear Subscriber:

As you may know by now, all BLOCKBUSTER Online members received a complimentary upgrade to the new BLOCKBUSTER Total Access ™ program. We hope you’ve been enjoying this program which gives you the option to return your online DVD by mail OR exchange it in-store for a free in-store movie rental. Since its launch, we’ve continued to build on this program by offering additional benefits such as: exclusive in-store product offers and discounts, monthly E-coupons that are good for movies AND games, as well as exclusive rental content only available at Blockbuster.

Beginning Month X, 2007, the price of your BLOCKBUSTER Total Access ™ plan will increase from $14.99 to $19.99.

While we hope you continue with your current BLOCKBUSTER Total Access ™ plan, we have also created Mail-Only plans which may better suit your needs. These plans will be called BLOCKBUSTER by Mail. With Mail-Only plans you can only return your online movie rentals by mail. Exchanges for free in-store movie rentals are not included with this option.

In addition, each month under either plan option, Blockbuster Online will continue to give you an E-coupon which is good for a free in-store movie or video game in-store rental. Simply, print your E-coupon and take it into your nearest Blockbuster store to redeem your free rental.

In light of this price change, please tell us what you would like to do by selecting one of the following options:

    Stay at my current BLOCKBUSTER Total Access ™ Plan for $19.99*/month

    See additional plans

    Cancel my subscription

Remember, you can change your plan at any time by logging into MY Account. If you have questions or concerns, use the following link to go to our site and sign in, and then click Contact Us from the home page.

With thanks for your continued membership,

Your Friends at BLOCKBUSTER
* plus applicable taxes

Comments

[prozac]

I don't use Blockbuster (only the once in a blue moon coupon for a cheap rental in my e-mail) but If you are a BB subscriber and you see this, you just know the price increase is around the corner. Bad move if BB plans on doing this to customers. I guess they will have to compensate in other ways (like more coupons?)

[usermonster]

Man, I knew this wouldn't last, but I was hoping we'd get a year out of it.

[gir]

We all new it was coming, just not when. Looks like sooner rather than later. Actually, I think it'll be sooner and later, because I think the price will increase twice.

I don't think an extra $5 is going to be enough to make Total Access profitable - not when all the light users opt for the lower-price plan, leaving just medium-to-heavy Total Access customers. $5 isn't going to cover the cost when the average Total Access customer is exchanging 7 or 8 disks in-store.

[leonardodicrapio]

Well, considering that I found this tidbit of unsubstantiated information last night, it wouldn't surprise me at all that Blockbuster will raise the rates. If Blockbuster is truly paying their franchises $3 per mailer, that is a lot of real money going to the franchises (and would probably explain why Blockbuster said in its annual report that almost all franchises were participating in Total Access -- I believe that there are still a lot of franchises who don't participate in Blockbuster's No Late Fees "program").

There are about 1,000 franchises in the U.S. About 4 to 5 thousand Blockbuster stores in the U.S. are corporate-owned.

"Originally Posted by netflix_got_blockbusted
Well, since Blockbuster Corporate owns the store I imagine that the net payment is $0. Most franchise stores aren't participating, right?

The payment of $1.5 is merely for tracking and incentive purposes, since the $1.5 will likely count toward some sort of bonus related to the store's performance.

Ours is participating (franchisee), and it's at 3 bucks per mailer. They owe us a pretty penny (although I won't go into a specific amount)."

http://www.ihateblockbuster.com/forum//showpost.php?p=206909&postcount=462

[Bob]

As they are a company that has a long history of getting sued by their customers I don't get it.

Pre Total Access customers:
Customer was on a plan for $17.99 for 3 out. They got a complementary upgrade (that they did not ask for) to total access. Then the total access price goes up to say $22.99 and blockbuster starts offering 3 out by mail for $17.99. Now the customer was switched to a plan that is $5 more expensive without doing anything.

New Total Access customers:
Customers were sold in store, online and in TV ads that the program is the same as netflix except they offer Total Access switch outs. Once they get a million people to sign on to this same price but better idea they then raise the price.

Really I think it's the pre total access customers who are going to sue. If you do nothing you got a "complementary upgrade" for only $5 a month while your old plan is still in existence.

[leonardodicrapio]

isn't this basically what held up the netflix settlement originally (having to opt out of a price increase)? netflix was going to bump people (who registered for the settlement) up from 3-out to 4-out for a month at no additional charge and then start charging them $23.99 unless people opted out of the price increase. in the current settlement (which is being appealed) you get bumped up one disc per month for one month and then it drops back down (or you can get a free month if you are no longer a netflix customer).

also, you are assuming the 3-out only goes up to 22.99 -- i wouldn't be surprised if it goes up to 24.99.

[FredFredrickson]

I would almost just go with the upgrade. I mean, $5 isn't much, and blockbuster has allowed me to get more movies in half a month than I could ever get via netflix in an entire month.

That being said, I have recently become subject to some very severe and very obvious throttling. Even though I got more than twice the discs I'd normally get with netflix, I was not getting more than I thought was fair under BBO, Since I'd never return them the same day I received them.

Just recently I returned movies about a week ago. Up until this time, returning movies to the store would free my queue. This time it didn't - so I reported the error, and manually cleared my queue. 3 days later they reported receiving my discs however nothing has been sent back to me. Fast foward 4 more days - my "sent" queue has been empty for exactly a week now, and still nothing has been sent to me. My entire queue states "available."

This is EXACTLY the reason I left netflix (way back in the day), because I was throttled, and then lied to about it. I called blockbuster and of course, I'm not being throttled, something about movies and shipping times and something blah blah blah.

What I want is an honest price and an honest service that doesn't lie about it's limits. And I'm not talking about including one line in it's terms of service. I mean including your limit on your billing statements. Up front, like a REAL business does. I'm paying for this, I have a right to know what I'm getting. I shouldn't have to by psychologically tricked into thinking I'm getting so much more than I am. If your service really is as good as you say, you'll have no problem stating your limits.

[leonardodicrapio]

Blockbuster claims to ship the next business day after you exchange a movie in store. During my free trial I found this happened only 62.5% of the time. Granted, the other 37.5% movies shipped in two business days (which isn't bad), but they are not really living up to the terms. But I was still in my Free Trial, and Blockbuster's terms state that they will process Free Trial customers faster, so I don't believe they would do any better if I were a paying customer.

I'm allright with Netflix's terms. If they can't ship out everybody's DVD's on a given day, they will ship the lightest users first (and probably Free Trial subscribers, too, although I am not sure of this), and heavy users last.

[leonardodicrapio]

i'm sorry blockbuster actually shipped 75% of my movies exchanged on the next business day (6 out of 8). they shipped on the second business day 25% of the time when i exchanged a movie in store (2 out of 8). i always had at least 30 Available movies in my Queue.

[Firstlawofnature]

Fred,

As stated on the web site most people use between 5 and 11 movies a month. While not spelled out exactly like you want it, it’s safe to assume this range will keep you from being under-prioritized. Does that work for you or is $1.80 a rental still too high?

[Aron]

Very interesting. Thanks for the article. 5$ is more that I expected, but they could be testing alternatives. I do think the proper strategy is to put in place the new price sooner rather than later. Every day that passes you throw money out the window building a customer base that may leave as soon as you adjust terms. It's too risky.

[Rusty Ramrod]

If true, this is an interesting, expected development. Offering a TA value added plan for an increased price is reasonable and the smart thing to do. It allows people who hate the stores to not have to subsidize the folks that do.

The key is the balance of any price increase. They need to push it to the limit without going over, but at the same time, insuring it is a sustainable program which the current TA program may not be.

What is that limit? Who knows. I'm sure BBO has been carefully tracking usage and knows the percentage of people who fully utilize TA. Of course that is always going to be a moving target.

As a general rule, I suspect there is an initial sharp increase as BBO customers discover TA. Over time it is my belief that peak quickly tails off as even the heavy users back off the rentals due to life, summer, running out of movies they want to watch, and frankly, burnout. At the same time new users are being signed up which will hammer the program until they tail off.

What is my personal BBOTA limit assuming a NF 3-out of $18? For the survey, I would answer $18 a month. In truth, I would say anything over $25 would probably scare me away from TA. It will be interesting to watch what happens over the next few months.

[hawk5391]

I would think that the folks that love BBTA should be willing to pay an extra $3-6 for it. Personally, I never liked BB's service due to the slow turnaround, poor website (especially their horrendous recommendations section, a feature which is important to me) and their bizarre inability to ship discs in queue order; and I am in no hurry to get back in the rental stores. This smells like desperation on BB's part to me -- they must be concerned about their inability to turn a profit.

[Firstlawofnature]

"I would say anything over $25 would probably scare me away from TA. It will be interesting to watch what happens over the next few months."

So you're still loving it at $23.99? Cool. Hopefully they try to jam that in there just like that.

[Edward R Murrow]

I think that the sweet spot for the Total Access price will be what Netflix charges for double the DVD programs.

For example, a 3 out program with Total Access is equivalent to a 6 out program from Netflix.

You take the BBO DVD to the store, exchange it for something off the rack, BBO clears the disc out of your queue and sends you another DVD through the mail. Since I'm on the 4 out BBO plan, I frequently have 8 DVD's in my possession from Blockbuster; 4 from the store and 4 from BBO and that's for $23.99 per month.

By the way, I looked on the Netflix site to see how much the 5, 6 and out 8 programs are but I can't find them. Is a 4 out program the maximum that you can have from Netflix now?

[dirjy]

If this is what BB is planning, they had better tread lightly. Separating the TA plan from a mail-only plan is very dangerous for them because the web-based portion of their service sucks compared to NF.

Customers who hate going to a video store are going to gravitate towards NF because their online experience is so much better than BB. The 'Watch Now' feature, for all it's flaws, still adds extra value to the NF online-only service.

The only way this could work well for BB is if they keep TA priced competitively with NF, and use the mail-only option to totally undercut NF prices.

[Aron]

re: image. Interesting that they are still looking to undercut Netflix on some of the price points. Such bizarre behavior out of this company. I would think they should focus entirely on the Total Access program. Make it the best deal possible. Set the spending on marketing and the pricing for the service at a good long-term setting, sit back and have some patience. That is the best way to maximize their legacy business.

BB management is erratic.

[corey3rd]

wow. they're already going to shaft folks after only a few months in operation. Way to tick off the masses.

judging from what the guys said to me at my local BB that over half of their business now is BBTA returns, this is going to knock the books a second time.

hopefully they won't mess with the program for a couple months.

[Rusty Ramrod]

"So you're still loving it at $23.99? Cool. Hopefully they try to jam that in there just like that."

Even at $24.99 (a penny below my "limit") the BBOTA per rental average would cost me 1/3 of the cost of my NF rentals, so yeah, while I'd love to see BBOTA keep the current pricing (and I've not observed any concrete evidence it *will* go up), an average of 53 cents a rental is OK by me.

[CJ]

I'm sure this was BB's strategic plan all along - put a teaser rate out there for the TA feature ($0.00/mo) and then after you are "hooked", start charging for the feature ($5.00/mo). Is it worth it? It is for me since I use the TA feature every Tuesday to get new releases.

[Edward R Murrow]

"BB management is erratic"

I believe that Icahn is starting to speak loudly and beat BBI management with a large stick.

http://biz.yahoo.com/ap/070306/all_business.html?.v=1

It's about time some board of directors halted this stupid practice of pay for non-performance.

On the flip side, whatever happened to the Netflix prize that must have been thought up by Netflix management in an opium den? Talk about a board of directors that's MIA.

[leonardodicrapio]

"Even at $24.99 (a penny below my "limit") the BBOTA per rental average would cost me 1/3 of the cost of my NF rentals, so yeah, while I'd love to see BBOTA keep the current pricing (and I've not observed any concrete evidence it *will* go up), an average of 53 cents a rental is OK by me."

Rusty,

47 rentals per month (47 X $0.53 = $24.91) on a 3-Out plan? That's 23 exchanges in store. And you say that Netflix cost you over $1.50 per movie ($17.99/$1.50 = 12 movies per month)?

I only got next business shipping on my exchanges on my exchanges 75% of the time on my Free Trial (when I should be bumped up to the top of the Priority List according to Blockbuster's terms).

C'mon, Rusty, you know you're embellishing.

[FredFredrickson]

To Firstlawofnature,

I'm sorry you don't agree with my point of view, but please don't take it as my complaining about price - I actually don't care about price that much.

What I'm speaking about is simply a desire for a company to either do what it advertises, or advertise what it does.

On BBO's sign up page it advertises:

"3 DVDs out at a time Unlimited rentals"

as well as

"Next DVDs On the Way - Never be without a movie."

Don't blame me for expecting what was written on the page I put my credit card into. Even if it makes you think I'm a prissy pants disc hog.

I mean, I'd be pretty pissed if I went to an all-you-can-eat buffet and was stopped after plate three. Sure I can get more than enough food in three plates - at an extremely good value (only $10, which makes it a little over $3.33 a plate!), but these rationalizations don't excuse false advertising. Did you forget about what happened to netflix?

[Old Timer Too]

Looks to me like a lot of speculation...

First, there was some screwups in shipping discs around the Monday holidays. Personally, I think they got swamped. If the problem is continuing, the complain to BB!

I had a problem at one time similar to yours. It turns out that everything I had in the top 30 rental spots was either Long Wait or not released or Coming Soon. The shipping computer evidently does not drill down that deep and if Available films are not close, they won't ship them either. After rearranging my queue, shipping returned to normal.

Personally, I get a lot of value out of the BBTA deal and go along with the price raise with no complaints, mostly because the price is still cheaper than walking in off the street and renting at the full price.

As to returning to NF, nope. Here's why: Even if I get a bad disc (and I got a lot of them from NF), I can take it in and get a free disc at my local BB while BBOL reships the bad one. Do that with NF!

I had one disc arrive broken - three times in a row. I wrote and suggested that these discs (not a major studio, by the way) were ultra sensitive to shipping and damage. Not only did I get the three free rentals, but BB even sent me an extra coupon to use.

Am I willing to pay an extra $5 or even more for that kind of service? Yup, because otherwise, I've lost a rental for at least two weeks. NF won't even think about giving an extra film in that kind of situation... or has someone experienced something different with NF?

Even more important, though, is that now customers have a choice - they can opt out of the Total Access plan if they want. And from the complaints about the BB stores I've seen, it should satisfy those folks. Especially those who can't find a movie to rent in a store.

BBOL and BBTA do one other thing - they keep NF on their toes and that's a good thing.

[leonardodicrapio]

"By the way, I looked on the Netflix site to see how much the 5, 6 and out 8 programs are but I can't find them. Is a 4 out program the maximum that you can have from Netflix now?"

Yes, if you are an active customer, you can change your plan in Your Account. All the plans of 3 DVD's out or more are $6.00 per disc minus one penny (i.e. 5 discs out is $29.99, 6 discs out is $35.99, and 8 discs out is $47.99).

Netflix has nine different subscription plans currently (four of which are 5 discs or more out). Blockbuster is "proposing" in their survey to have 12 different plans (none of which have more than 5 discs out).

[leonardodicrapio]

meant to say (none of which have 5 discs or more out).

[Firstlawofnature]

What if you were stopped at plate 10? It is all you can eat right? This topic is an old one that does fall into a gray area. You must realize however that you are on the outside of the bell curve since you are focused on the purity of the language and not how much it costs per unit of entertainment consumed. The vast majority of consumers will measure whether or not the deal was good by the economics involved and not the language in the user agreement. Class action lawyers can monitor the user agreement for accuracy.

[type-cast]

I think they should give Total Access to all users, BUT charge $3-6 extra if you want the 2-day New Releases available. That would cut their losses on the hottest titles and still let people get most movies in the store. I'd also like them to go back to giving a weekly coupon option (instead of TA). I won't pay a cent extra for Total Access. I will take all my business to Netflix and the indie stores. Blockbuster is foolish, if they think people will stay with them after a bait-and-switch.

[junkfood]

I also received that survey, and I plan to do exactly what I said I would do on the service question. I'll drop down from my 2-at-a-time unlimited to a 1-at-a-time unlimited plan.

I like bringing the DVDs back to the store and don't want to lose that privilege, but I've cut down on how often I do that because there just isn't that much in the store that I want. As long as I have one per week to bring in on Tuesdays when the new releases hit, I'm good. There's rarely more than 1 new release I'm interested in anyway.

And if I did downgrade my plan for BB, I would probably upgrade my Netflix plan (currently 2-at-a-time with a 4 per month max). As someone already mentioned, Netflix is far and away superior when comparing it to just the online portion of BB.

[corey3rd]

since I joined BBTA in Nov, I've been sent 96 titles - all were returned to the store for swap-outs. So that's put $288 on my local store's accounts - although since the store rents titles for $4.49, it's cost them $143.09 in potential rental income difference.

And that's not even including the dozens of freebie rentals I snagged from turning in old netflix ripaways.

So just for strange numbers, I've rented 200 plus for under $60.

I'm the worst customer Blockbuster could ever want.

[Edward R Murrow]

"...8 discs out is $47.99..."

That's the kind of value that I'm talking about. My 4-out plan from BBOTA that costs me $23.99 would cost me $47.99 at Netflix.

With BBOTA I always have 4 from the store and 4 from BBO.

I may not always be the brightest light on the porch, but the value proposition looks pretty easy to figure out, as long as BBI doesn't raise the 4 out plan to $47.99.

I don't give a flying F-word about web site; just give me movies and lots of 'em.

[bobemmerich]

What I dislike most about this - which I'll admit is a pet peeve of mine - is offering "FREE" in store rentals on the BBTA 3 out plan for an additional $4 ($21.99) over the by mail only option for $17.99. Note to Blockbuster: what you are doing NOW is offering "free" in store rentals with BBTA, if I have to pay an additional $4 every month for the rentals then they aren't "FREE" are they, dumb@sses.

Another thing that wouldn't make any sense at these prices: 1 and 3 out at a time plans are $4 more but 2 out is $6 more. Huh?

I'll give them kudos for separating the limited and "unlimited" plans though, they REALLY need to do this on their website, trying to change plans is like to trying to vote in Florida.

[type-cast]

"since I joined BBTA in Nov, I've been sent 96 titles - all were returned to the store for swap-outs. So that's put $288 on my local store's accounts - although since the store rents titles for $4.49, it's cost them $143.09 in potential rental income difference."

They don't get any money now, unless you buy something. So they are giving it away to you and losing potential rentals. Not all titles are likely to be rented, but they are surely losing money on the 2-day new releases. That is why I feel they should limit those before they charging extra for Total Access. I will not pay extra for Total Access, because I do not care much about new releases. I have not rented more than one 2-day since TA started, and a few regular new releases. They should either limit the 2-day titles or require you to pay extra for access to them.

[Old Timer Too]

Keep in mind that this is just a survey. Even I posted like it was reality and it isn't. As to no more "freebies," you missed the part about the coupon. You'll still get one of those each month on either type of plan (according to the survey screen).

As to keeping the wording "free," I doubt that will happen. Right now, they *are* offering the BBTA for no additional cost. The question is how long will it continue? It took them three to four months to discontinue the 5, 6, and 8 out plans once it was announced.

And even then, they offered an alternative - take out a second account (which I did), so I still have the equivalent of an 8-out plan, but with the added advantage of *two* e-coupons a month.

[Rusty Ramrod]

"They should either limit the 2-day titles ..."

Many members use TA for this express purpose to avoid the Long Wait syndrome at NF and BBO. A BBOTA envelope was exchanged for Borat today and it is sitting here right next to me as I type this.

Excluding new releases would be a disastrous mistake I can't see them making.

I'll check when I take this movie back, but as of last week our local store was still receiving vigs for TA rentals.

[Rusty Ramrod]

Oh and I forget to add, outside of a very few, you are correct, most of the new releases suck. ;-)

I have a feeling I find that out in a bit with ole Borat here.

[corey3rd]

The total access element is a major plus for me since it's a 2 mail back from my city to the DC on the envelope. The ability to drop the DVD off at my nearby BB before 11 p.m. to get a new title shipped out the next day is what makes me interested in the program. Although the queue weirdness still ticks me off. Blockbuster still has way too many glitches in the system. I can forgive them because of the in store action and the fact that they will email me freebie coupons if they've botched my queue by not shipping anything out. But they are not at the streamlined level that should allow them to start tinkering with the price and package.

[type-cast]

"They should either limit the 2-day titles ..."

@ Rusty:
"Many members use TA for this express purpose to avoid the Long Wait syndrome at NF and BBO."

Most have no problem getting new movies from Blockbuster Online. Light users usually have no problems getting them from Netflix.

"Excluding new releases would be a disastrous mistake I can't see them making."

Note that I said "limit or exclude." I would not mind a limit of 1 a week on 2-day titles or 1 at a time. Either option would make the plan more profitable and cut the opportunity costs in giving away the hottest new rentals to customers who bring in NO money.

"I'll check when I take this movie back, but as of last week our local store was still receiving vigs for TA rentals."

The fix is in. Accroding to people at I Hate BB (many employees or managers at BB stores) the stores will get NOTHING unless they sell something (candy, magazine, used DVD) in the same transaction. Blockbuster was losing too much money on this deal, so they put in more restrictions for the deal. Since most people don't buy anything, the stores get "totally" screwed by Total Access.

[type-cast]

"The ability to drop the DVD off at my nearby BB before 11 p.m. to get a new title shipped out the next day is what makes me interested in the program."

It doesn't work for me. I returned DVDs last Sunday and they still haven't sent anything. It's rare for them to ship new DVDs the next business day. They usually take 2-3 business days. Their shipping also takes 2-3 days. NF has 3 or 4 distro centers which give me over night delivery. BB just uses Total Access as another excuse to slow down service.

[leonardodicrapio]

type-cast, i read the comments you mentioned on IHBB, and it was "reported" that the (corporate?) stores get $3 per exchange if something is up-selled in the same transaction (i.e. candy). it was also "reported" that it used to be $1.50 per exchange (and I believe that "exchange rate" again is for corporate stores). but that is all funny money, anyways, (if this is the cost structure for corporate stores only) unless the clerk gets some sort of "commission" (a nickel?) for up-selling.

i think it would be difficult for blockbuster corporate to police this policy at the individual franchises, although i could be wrong.

"The fix is in. Accroding to people at I Hate BB (many employees or managers at BB stores) the stores will get NOTHING unless they sell something (candy, magazine, used DVD) in the same transaction. Blockbuster was losing too much money on this deal, so they put in more restrictions for the deal. Since most people don't buy anything, the stores get "totally" screwed by Total Access."