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Netflix Subs Offered 'Blockbuster' Gift

5 Dec, 2006 By: Erik Gruenwedel

In a shrewd marketing gambit aimed at identifying and luring away Netflix's expansive subscriber base, Blockbuster Inc. announced through Dec. 21 it would grant the online rental pioneer's subscribers the right to use Total Access, Big Blue's nascent online rental/in-store return program.

Blockbuster Online, which has about 1.5 million subscribers, is attempting to reach 2 million subs by the end of the year at the expense of Netflix's base of more than 5.7 million subscribers.

Netflix subscribers who bring the address flaps from their rental envelopes to participating Blockbuster stores would receive a free movie rental for each flap.

The promotion does require a Blockbuster in-store membership but not an online membership.

Netflix subscribers and others can sign up for a free two-week trial Total Access membership at Blockbuster.com or at a participating Blockbuster store.

“We want these movie fans to experience getting the movies they want without the wait so they never have to be without a movie,” said Blockbuster chairman and CEO John Antioco.

A Netflix spokesperson said the campaign amounted to a “Hail Mary” by Blockbuster, which he said is losing money at the store level and has had no impact online.

He said Netflix is forecasting 6.3 million subs by the end of the fiscal year (ending Dec. 31) and GAAP net income from $41.7 million to $47.7 million on revenues approaching $1 billion.

He questioned why a Netflix subscriber with access to 65,000 titles would want to go to a video store with about 3,000 titles. He said Netflix ships about 1.4 million DVDs per day, including 35,000 to 40,000 titles.

“The rental industry is moving online and Netflix pioneered that and continues to lead it,” said the spokesperson.

Analyst Michael Pachter with Wedbush Morgan Securities in Los Angeles said the campaign is a clever way to lure Netflix subscribers for a limited time without paying to advertise it.

He said Blockbuster doesn't have access to Netflix's customer list and hopes the mainstream media's attention to the story would attract consumer awareness.

“This is for the media,” said Pachter. “It is free publicity as opposed to advertising on TV, which would be costly for a two-week promotion.”

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