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Blockbuster Launches Subscriptions, Expands Movie Trading Co.

31 May, 2004 By: Holly J. Wagner

As Blockbuster Video moves forward with its planned nationwide Movie Pass subscription program, the chain is also quietly expanding its Movie Trading Company concept into a handful of new markets.

The chain is already in the Dallas/Fort Worth and Houston markets, and has announced it would put three Movie Trading Company stores into the Atlanta area, but Video Store Magazine has learned the company plans 45 or more stores in five markets — including San Antonio and Austin, Texas; Salt Lake City; and Denver, by year's end. The chain buys, sells and rents used movies. Rentals are priced about $1 less than a la carte rentals at Blockbuster stores, Movie Trading Co. store personnel said.

The Movie Pass program is available in more than 5,000 corporate and franchise stores in the Untied States, at $24.99 a month for two titles at a time and $29.99 a month for three. That puts the Movie Pass price at $8 more for a three-out plan than Netflix, even after this month's $2-a-month price increase at the online rentailer.

“We look at it from a point of view of the customer who wants the best value in the marketplace and wants the movie right away,” said Blockbuster spokeswoman Jerianne Thomas. The pricing is competitive, she added, because “customers on the pass program tend to rent an average of 10 to 12 movies per month.” In contrast, she said, “Netflix customers typically rent about seven movies a month” because of the time it takes to do transactions by mail, so the per-title price is comparable for frequent renters. The program also applies to VHS rentals, unlike mail delivery services.

“Blockbuster said, ‘with us, if you have a two- or three-movie pass, you can come in every day.' Blockbuster is going to take a customer that is paying them $50 and convert them into a $25- or $30-a-month customer, instead of a Netflix customer,” said Michael Pachter, an analyst at Wedbush Morgan Securities. “Blockbuster thinks they have the potential to lose 800,000 customers to Netflix in the next two years, and in order to retain them, they are willing to take a haircut on those customers.”

Blockbuster still plans to roll out its online rental program in the fourth quarter and have it integrated with the in-store pass program sometime next year, Thomas said. The online program will be “competitively priced,” Thomas said.

Until then, Blockbuster subscribers will have to visit the store to get their titles and return them to the same store where they were rented, Thomas confirmed.

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