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Blockbuster Testing Online Rental Price Hike

18 May, 2005 By: Erik Gruenwedel

Blockbuster Inc. has begun gauging consumer response to an unlimited online monthly rental fee of $17.99 — $3 more than the current price.

The price increase, if enacted, would price Big Blue's online service on a par with rival online rental pioneer Netflix and would appear to halt an ongoing price war between the two services.

Blockbuster spokesperson Jerrianne Thomas said the company is testing several price points, including a $4.99 first-month rate for three titles out that reverts to the $14.99 per month fee on the second month.

“We have a lot of different plans out there,” Thomas said. “We're always doing lots of tests.”

Consumers who respond to the $17.99 test price, which began Monday in select markets, would be offered the current $14.99 three-movie-out monthly rate, Thomas said.

Blockbuster launched its online service last year and has cut subscription prices twice. It claims about 750,000 online subscribers. Netflix has about 3 million members and has reduced its monthly service price once.

Media analyst Marla Backer, with New York-based Research Associates — Soleil Securities, says the testing is further indication of dissident shareholder Carl Icahn's influence as a new board member.

“If this is any indication of [Antioco's] response [to Icahn], he listens,” Backer said. “The previous price reductions were clearly one of the issues that Icahn has with the company. I think [$17.99 per month] is much better pricing.”

A Netflix spokesperson said the company follows market dynamics “very closely,” but remains primarily focused on its business.

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