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Hollywood, Blockbuster Testing 99-Cent Rentals

27 Sep, 2004 By: Erik Gruenwedel

Hollywood and Blockbuster video stores have quietly borrowed a page from the 99-cent store discount chain by offering DVD and VHS rental titles for less than a dollar. Other than price, each company's test rental program includes noticeably different criteria.

The Hollywood promotion is for an undisclosed time, does not require coupons and covers new and catalog titles for up to five days, according to personnel contacted at participating stores and a mailed flier.

In calls to 40 Hollywood stores in 40 cities across the country, Video Store Magazine found five stores participating in what clerks described as a “test” program, including outlets in Santa Ana, Calif.; Lake Forest, Calif.; Charlotte, N.C.; Nashville, Tenn.; and Des Moines, Iowa.

Six other outlets contacted said they would honor the 99-cent price with a coupon.

The offer does not include video game rentals. It does include guaranteed-in-stock titles, according to a flier for the Lake Forest store labeled “Grand Opening Special.”Blockbuster's 99-cent rental plan is being tested in Denver and outlying areas such as Boulder, Colo.

According to employees contacted in those stores, the program is good only for select titles (Mean Girls and Scooby-Doo 2 are examples) per week and for one-night rentals only.

An employee in a Santa Ana-based Blockbuster said a similar pricing plan would start soon in that store.

It is unclear whether Hollywood or Blockbuster plan to implement similar pricing campaigns nationwide.

Blockbuster is engaged in “a series of tests focused on terms and pricing,” CEO John Antioco told analysts on the company's second -quarter financial call. “The outcome of these tests will determine our direction going forward. But our goal is to remove any barriers to renting at Blockbuster.”

“We have been conducting a series of tests focused on terms and pricing, and we'll see how this determines what we do going forward,” reiterated a Blockbuster spokesperson last week.

“Why would they go from $3.99 to 99 cents?” asked Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles. “They can't make money on 99 cents. It has to be only on selected movies. Even the studios wouldn't want them to do it.”

Pachter said he believes the tests represent some form of price elasticity to see if people would rent more movies at $1 compared to fewer movies at $4.

“I find it hard to believe they could do anything at 99 cents except catalog,” he said.

Despite repeated calls, representatives from Hollywood Entertainment Corp. did not return calls by press time.

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