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leonardodicrapio

Just rearranging the deck chairs on the Titanic. Seriously, with over $105 Million Operational Loss, Blockbuster would need to collect an additional $10 per month from 3.5 Million Total Access customers in order to just break even. Blockbuster ended the quarter with 3.6 Million customers (and there were probably 100k-200k of those customer who were still on a Free Trial).

gir

Two sets (turns) per month? I wonder how the throttle-haters would respond to that. And it's nice (sarcasm intended) to see them use their own numbers ($4 a rental!) to derive value. My own numbers would be half that, and arguably you can get an even better value with RedBox.

Total Access Unlimited at $25 is still a steal though.

leonardodicrapio

"Total Access Unlimited at $25 is still a steal though."

Total Access Premium only makes sense if you exchange on average more than two movies per week. Blockbuster bumped the price of the Total Access (Limit Two movies by mail per month) up by $2 to $7.99. The other Total (Limited) Access plans are going to have to be increased by at least $2 eventually, too (at least IMHO).

"Why is BLOCKBUSTER offering plans with a pre-determined number of monthly in-store movie exchanges?

Answer


We are now offering a full range of subscription options so that our customers can more easily find a plan that meets their specific needs, whether that means a basic online-only service without any in-store exchange privileges or a premium plan that includes unlimited in-store exchanges. Our new line-up of plans allow subscribers to get the right number of movies for their needs. Current subscribers are welcome to change their plan at any time by going to My Account."

The real answer: The previous pricing model was unsustainable.

bostonkevin

Are they grandfather-ing in their current Total Access subscribers at their current rates, or raising the prices on current subs? Talk about a bait and switch.

leonardodicrapio

"What is the difference between BLOCKBUSTER Total Access Premium and BLOCKBUSTER Total Access?

Answer


With BLOCKBUSTER Total Access Premium, customers enjoy an unlimited number of movies through the mail with free in-store movie exchanges per calendar month. BLOCKBUSTER Total Access gives customers an unlimited number of movies through the mail; however, there is a pre-determined number of free in-store movie exchanges per calendar month. If the pre-determined number of free in-store movie exchanges is met during the calendar month, customers have the ability to exchange their online movie mailers for a discounted movie rental at a participating store for the remainder of the month. The pre-determined number is reset each calendar month for free in-store movie exchanges."

Real answer:

BLOCKBUSTER Total Access Premium is what we used to give you with Total Access except now we want to charge you $7 more per month. We decide to continue your Total Access plan the same thing even though it is now Limited Access (that name just wasn't good for marketing purposes). Besides by doing things the way we are doing things there is no price increase on Total Access!

leonardodicrapio

Wow! Who writes some of this stuff? Blockbuster raises prices, and someone thought they cut prices. This person is absolutely clueless.

"AP
Blockbuster Cuts Mail DVD Rental Prices
Thursday July 26, 1:52 pm ET
Blockbuster Cuts Prices on Online DVD Rentals Following Price Cuts at Netflix


DALLAS (AP) -- Blockbuster Inc. on Thursday announced price cuts on its online video rental plans, following a similar move earlier this week from rival Netflix Inc.
The company said it would reduce the monthly cost on its Total Access Premium DVD rental plan -- under which subscribers can rent up to three DVDs by mail at a time and return them at stores or through the mail -- to $16.99 from $24.99.

ADVERTISEMENT


Furthermore, Blockbuster cut the monthly price on its cheapest Total Access hybrid in-store and online DVD rental subscription to $7.99 from $9.99. Total Access customers receive a limited number of DVD exchanges at the store per month, while Total Access Premium customers get unlimited store exchanges. Rentals by mail are unlimited under both plans.

Blockbuster also cut the monthly price on its cheapest Blockbuster By Mail service to $4.99 from $8.99. The most expensive Blockbuster By Mail service, which allows subscribers to keep three DVDs at a time, still costs $16.99 per month.

The company also said Blockbuster By Mail customers will receive the option to exchange their online rentals at some stores for $1.99 each, below the store rental price.

Blockbuster's $4.99 plan competes with a similarly priced offering from Netflix, which recently lowered prices by $1 on two of its most popular online DVD rental subscriptions. Netflix shares suffered earlier this week after the company's price cuts led some analysts to downgrade the stock. Some analysts cited increasing competition from Blockbuster.

Blockbuster shares added 2 cents to $4.19 in afternoon trading.

Netflix shares gained 55 cents, or 3.3 percent, to $17.25."

http://biz.yahoo.com/ap/070726/blockbuster_online_subscriptions.html?.v=1

aussieguy

Phew the free monthly trials are with the TA Premium thank goodness!!! I would have been upset at only 5 instore free rentals per month.

I wonder if they will grandfather in existing TA accounts?

They are going to lose so much business jacking up the rate by $7. Are they crazy? That is a 39% price hike for the same service.

Hahahahaha.

Sorry Blockbuster I don't think this is going to fly.

volwrath

Aww and i was about to dump netflix and move to BB.. I might still, but now it doesnt seem so enticing.

Hunter McDaniel

I'm no fan of BB, but I think the changes make a lot of sense. The unlimited TA program was clearly unsustainable. The 5-exchanges-per-month limit will only impact customers who weren't profitable anyway while still providing a value-add differentiation from Netflix for normal customers.

leonardodicrapio

I didn't notice that a $90 million favorable tax audit was also include in the $35 million quarterly loss. The quarterly operating loss is over $200 million. Blockbuster would have to raise prices Total Access by $20 per month to break-even. Blockbuster may lose $100 million already in July alone.

usermonster

I'm sure BB crunched the numbers to see how heavily people used TA. I know I certainly didn't exchange every single DVD at the store. Maybe about half the time. On the 2-out TA plan, the price is now just a dollar more than Netflix's 2-out. With A BB store down the block from me, I think it's still a good deal.

On the other hand, if Netflix can figure out how to get its Watch Now movies wirelessly to my TV, then . . .

FredFredrickson

Here's the major issue with this:

1. Nobody's going to pay an additional $7/month for the same service they used to be getting. Nobody in their right mind.

2. Anybody left over whose account is just plainly downgraded to the 5 exchanges will feel ripped off. Suddenly the money they've been paying isn't worth as much?

This is a good way of just plainly pissing off every customer possible. Bait & switch over time! My feeling is, this is when everybody jumps ship. My problem with blockbuster has always been that I don't feel it's a respectable company. When it comes down to it, they're sneaky bastards with their late fees, and their pretend in stock guaruntees (which resulted in a coupon saying, by the way, pick up this movie later when it's in stock, and we promise to charge you full price, just as good as if the guaruntee wasn't in place). That, plus high ass prices, always turned me off of blockbuster. Then total access comes along and since I was pissed at netflix for throttling, I said, sure- let's give it a go. Sure enough blockbuster's true colors are shining through though. I'll be jumping ship and going to a local place that rents old releases for a dollar (not $4.95 - THAT'S CRAZY BLOCKBUSTER! YOU FOOLS, I CAN BUY OLD RELEASES FOR LESS THAN THAT!)

Ultimately walmart wins. at apx $10/movie, rentals are making less and less sense. If netflix gets a good selection of watch now titles, this is the core point at which netflix can finally put the last nail in blockbusters coffin.

phildawg

what about the 4 out and 5 out plans? I actually found out about this a little bit ago because I went to change my account to the 5 out plan and was like what is this? lol. Guess 3 out /w unlimited rents is highest plan they offer now.

Marius

I personally don't care much as a Netflix subscriber, but I mentioned this to my office-mate who is a Blockbuster subscriber. He's probably going to switch to NFLX now. In-store is what sold him on BB, and mailing in/returning movies to BB takes him on average a 3-day round trip (vs. the 2-day round trip it takes me with NFLX).

phildawg

I'm definitely still staying with blockbuster... Getting new releases is so impossible with netflix if you actually use the service, I think the magic number is throttled at about 7-9 rents a month... and well 2 movies a week is definitely standard for me.

I could careless about 1 extra day turn around time with BB... I mean I'm not sitting around waiting for a movie to watch the night it comes in, I rent/return during the week and watch on the weekend.

Don't regular people do it this way too?

Donuts

There really aren't that many people who want more than 5 in-store movies a month, anyway, and those who do probably aren't profitable for BB. If those users quit the service, BB wouldn't view that as a catastrophe.

I prefer NFLX, but I think that BB will continue to steal market share with this new plan, and will probably increase profits while they do it.

J

I decided to give BB one more month and then I was canceling anyway once school started back (I'm a teacher and don't watch as many movies once school begins). Looks like I'm getting out right on time. I know one of the girls who works at my local Blockbuster and she was saying the manager's were complaining about how the profits had dropped since the Total Access plan had started. But I do think such drastic either price increases or limitations on movies you can exchange out will really hurt the smart BB customers who were just using it because of the value and not brand loyalty.

Apexified

I had actually just decided to switch back to Netflix the day before this news hit. It just validates that decision more so.

The reason I decided to switch; I realized that if blockbuster wins, we all lose. They've only ever done what is absolutely necessary. This recent update puts an exclamation on that point.

tim

It's kind of like if a college raised its tuition 39 percent, out of the blue, but then said to its students that they can still choose to pay the old tuition, and just take half the classes they'd normally be able to take.

But then the market it like they're giving their students more options! Yes, now you can more easily find a program that works for you!

heebner

Most of the whiners about BB's plan changes are former Netflix customers who used to be flies on Netflix's ass before they got throttled out. Parasites are always looking for a new host, and they found one in Total Access. But just because you want to rip 50 DVD's a month onto your hard drive for $17.99 doesn't mean it's good business for anyone to allow you to do so -- it was never meant to last.

Jason D.

I received an e-mail from Blockbuster. It looks like they are grandfathering in old customer features, but increasing the price. So I was on the three-out plan before, I will still get e-coupons and unlimited store exchanges. My plan price will be increasing a dollar. Here's the e-mail (main part):

QUOTE
We want to let you know about some changes to our BLOCKBUSTER Total Access™ subscription plans. This information is provided for your reference only – your subscription plan will not be affected by these changes.

Beginning July 26, 2007, there will be a price increase on your current unlimited plan. We will also begin to offer plans which limit the number of in-store exchanges available each month.

As a preferred customer, your plan will not change at this time. Please continue to enjoy your exclusive subscription plan, including no monthly limit on free* movie rentals or discounted game rentals when you exchange in-store, at today's price – far below the published rate available to new subscribers.
UNQUOTE

We do not visit the store often enough to make it worth it. The e-coupons were the main differentiator between Blockbuster and NetFlix and I find we don't even use those consistently enough.

I may switch to NetFlix because the Blockbuster website is horrific. The queue page is extremely slow to use. I hope the company that redesigned their website was fired. The only thing that may keep me from switching to NetFlix is the fact that it seems like BlockBuster has better availability of new releases. I usually get new releases right away or at most a week or two after release.

FredFredrickson

Yeah, I just got the email too. Blockbuster just saved their sorry asses. WOOT FOR GRANDFATHER CLAUSES! We're saved!!

gir

Guess BBO is a little worried about loosing all the customers they've recently added. Man, they're really stuck between a rock and a hard place. How do you increase profits (or in this case decrease losses) without driving away customers?

leonardodicrapio

Blockbuster Math:

The $18 Total Access plan is a $38 value. But if you got the $17 Blockbuster by Mail plan and exchanged 5 movies (for $2 each) it would only cost you $27 out of pocket.

The $8 Total Access Limited Plan is 1 Movie Out at a time (Max of 2 Movies per month mailed) -- there is also a max of 2 movies exchanged per month. First of all -- why don't you just give these people unlimited exchanges? If someone could manage to get 3 exchanges one month it is only because they only got 1 either the month before or after. Secondly, the Blockbuster by Mail is $5 per month, but there is only $4 of maximum value you can get for the extra $3 you would have to pay to upgrade to Total Access (which is another reason why Blockbuster should allow unlimited exchanges on this plan -- the value proposition is not good).

The Two-Out $14.99 Total Access plan looks like a loser now. Only 3 exchanges. For an extra $3 you get two more exchanges and an extra movie out per month.

leonardodicrapio

Some of my predictions were pretty close to on the mark. Blockbuster reached 3.3 million paying TA customers and lost $110 million in 2Q07 (a quarter earlier than I thought). Blockbuster raised prices by $7 on all plans more than four months earlier than I thought.

"Blockbuster will reach 3.6 million paying Total Access customers and lose $100 million in 3Q07."

"On December 1st, 2007, Blockbuster will announce that they have surpassed 4 million Online customers, they will raise prices on Total Access (they will call it premium pricing) by approximately $5 per month for all price plans."

http://www.hackingnetflix.com/2007/05/blockbuster_add.html#comment-68377654

leonardodicrapio

Ahhh, Ricklogic, are you still making statements like this one from less than three months ago?

"The total potential physical DVD rental online mail order business was never 20,000,000..."

As of June 30th, 2007:
Netflix -- 6.75 million customers
Blockbuster Online Total Access -- 3.6 million customers

Nine months ago:
NFLX -- 5.6 million
Blockbuster Online -- 1.5 million customers

That's 10.35 million -- up from 7.1 million nine months ago. That is up over 45% (and over 3 million people) in 3/4 of a year. It's not that hard to imagine there will be 20 million online customers in 2-3 years.

http://www.hackingnetflix.com/2007/05/blockbuster_add.html#comment-68357020

Old Timer Too

Leo's having fun with this one...

Anyway, the price increase was predictable for several reasons, one of which was in-store profitability and support. BB isn't going to tear down all their stores very quickly. First, it is just too expensive to close stores. The one time charges alone can be horrific.

On to the math, ignoring BB's "bargain." I turn an average of six times a month when I'm home (I have a lot of time on my hands) and can, if I exchange/drop-off in-store, turn as many as eight times in four weeks. I don't care about renting order (I own over 300 titles and add more as I determine if a film is a keeper or not (Amazon loves me)).

At $25 a month, under the new program, I can watch 24 films a month and up to 48 if I exchange in store. Yes, I get a film on Monday, watch it and return it late Monday night to a store near me (I have four in five-minutes driving distance). I get the next film typically on Wednesday or Thursday and do the same thing... returning it late that same day. I have the next film by Monday...

With NF (no throttling), I'd get a film on Monday and if lucky, could get it in the mail before the last pickup that same day. They'd get it on Tuesday and I'd get my next film on Wednesday. Same turnaround time.

I can't do that we three films at a time - the time to watch simply isn't there, so typically, I'd drop the films off on Tuesday, and they'd get and ship on Wednesday. I'd get and ship on Friday. They'd get on Monday and I'd receive on Tuesday.

Now enter NF throttling, shipping following day from a more-distance DC, etc., and the max goes down very quickly. I'd be lucky to get six turns over a four-week period. And most of the time, less than that.

UP to two times amonth, I'll see a film get delayed in shipping by one day from BB. Less than a fourth of the films take longer than two days to reach me. I can still average six turns a month with BB or better by exchanging in store. Even at $25/month, BB is a better deal and no frustrations over NF's throttling practices (which is what drove me away from them in the first place).

Am I a parasite? Sure, but then, I'm willing to pay for the better service. If NF ever stops throttling altogether, then I may go back... maybe, when I run out of films to watch...

Leo's predictions don't take into account the drop in NF's customer base over the past quarter. The rental market may have topped out, though I think it is bit early. If they reach 20 million customers in the 2-3 years predicted what? a year ago?, then I will be surprised. I think the market is going to max out somewhat less than that.

The price increase and options open is a very good move on the part of BB. They should be able to turn a profit from most of their customer base (I know I'm not alone in how I use the service, but there are weeks at a time where I don't watch or rent anything - but the choice is mine and I get decent service, both in store and through the mail). The big thing is that aside from not shipping in order (which is important for some folks), I'm really, really happy with the service, even if I had to pay $25/month for it.

leonardodicrapio

Why would you pay $25 for Total Access Premium? If you only exchange 6 per month on average, it would cost you $18 plus $2 for the sixth exchange (assuming you are not grandfathered into Premium).

Ricklogic said there wasn't an overall market for 20 Million Online DVD customers less than three months ago. I said it could happen within 2-3 years. The overall market is now over 10 million customers, and I did factor in Netflix's latest quarter. Netflix had 6.8 million customers 4 months ago; Netflix had 6.75 million customers 1 month ago.

Blockbuster is permanently crippling themselves with this Total Access program. Each Blockbuster TA customers is now contributing about $5 per month to Blockbuster's losses (that $5 number is assuming there is no advertising going forward -- including the existing advertising to date TA is racking up about $10 per sub per month in losses). Cutting $50 million out of the advertising budget will slow unprofitable growth some, but Blockbuster has opted to self cannibilize their in-store customers. And significant losses will continue at Blockbuster

wrldruler

Not surprised.

I haven't paid any attention to their financials, but I kept asking myself, everytime I would exchange 3 movies at the store, how the heck they were making any profit off of me. I can see they weren't.

I am probably in one of the non-profitable customer groups.

I only watch new releases, and its too hard to get them from the mail. So every Tuesday I go into the store and exchange 3. Since they started this in-store business, not once have I dropped an envelope in the mail. Every one has went to the store.

I have also stopped caring what was in my Queue or what was mailed to me. Lately I've just been getting them out of the mail, sealing the envelope right back up, and then driving to the store for a new release.

Note: I do NOT copy DVDs. I tried copying a DVD one time, and it took so long that it wasn't worth my time.

I probably exchange 6-9 DVDs a month at the store.

MKEastP

I received my pleasant little email message from Blockbuster informing me of the change. Basically, my nice $17.99 subscription cancels on Aug 30th, and if I want my free in store game rental I need to upgrade. The only reason I even had this plan over netflix was for the in store game rental. When Aug 30th comes I am switching accounts. Netflix was by far the better service, but blockbuster had the instore exchange system. I used to have to complain a lot to blockbuster for not receiving anything from my queue for multiple weeks. This is the last straw. Back to my tride and true. Netflix hook-up with Hollywood Video please..ahh the dream..

FaithFactor

***STILL GET OLD PRCING AND PERKS!!*** I found a way to still get into the old price and plan with unlimted store benefits!

When signing up use Code: 97204
You get: one month free Plan: $17.99 / month (plus taxes) 3 at-a-time, unlimited unlimited in-store movie exchanges +1 FREE bonus Movie or Game Rental E-Coupon / Month

I signed up at 4:00pm central time 9/2/2007, and it worked.. don't know when this will expire this... and here is what my account shows right now:

-----------------------------------------
Your current plan...BLOCKBUSTER Total Access Premium 4 Week Free Trial $17.99 / month (plus taxes)
3 at-a-time, unlimited
unlimited in-store movie exchanges
+1 FREE bonus Movie or Game Rental E-Coupon / Month
Next Billing Date: September 03,2007
-----------------------------------------

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