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).