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Flying in Netflix's Wake

14 Mar, 2014 By: Chris Tribbey

When Blockbuster announced in late 2013 that it was closing the rest of its U.S. stores and killing its by-mail DVD and Blu-ray Disc delivery service, Dave Hodess saw an opening.

“We had many consumer requests for movies over the years, and Blockbuster’s closing caused us to take another look,” said the CEO of by-mail gaming subscription service GameFly. “It’s also a very easy idea for us to test.”

Starting April 4, GameFly will begin offering movie options to its customers, presenting a new alternative to Netflix’s service.

Less than 60 films — available on DVD or Blu-ray Disc — will be available at launch. Still, the films are mostly new releases and come from every major studio. Only GameFly subscribers with a two-disc-out-at-a-time monthly rental plan will be able to add the movies to their rental queue (the service also has a one-disc-out-at-a-time plan). The two discs can be two games, two movies or one of each.

“We thought that there would be demand for both formats,” Hodess said of the decision to add both DVDs and Blu-rays to the offering. “In fact, our subscribers are adding both to their queues.”

GameFly isn’t working with the studios directly for discs, instead buying them “with a distributor,” Hodess said. He said the company wants to see exactly how much consumers latch on to the movies before the company decides whether or not to add more films.

“It depends on how consumers respond to this introductory assortment,” he said, noting that the company is looking at adding older, catalog titles and titles from independents. “We haven’t ruled anything out at this point. The great thing about testing is that we can make decisions with actual data instead of suppositions.”

Founded in 2002, GameFly has always prided itself on being to games what Netflix is to movies, at least before Netflix moved to streaming instead of disc as its focus. GameFly currently offers more than 8,000 game titles for a variety of gaming consoles.

If GameFly wants its movie offering to be successful, it may have to revisit its pricing, as it differs significantly from Netflix’s. GameFly’s two-disc-out-at-a-time rental plan is $22.95 a month. Netflix offers a “limited plan” that allows for two DVDs or two Blu-rays out at a time per month for $4.99 and $5.99, respectively, as well as two-disc at-a-time offerings ($11.99 DVD, $14.99 Blu-ray), among other plans, all less than $20.

Also, GameFly’s movie offering will have to compete with the $1.20-per-day price Redbox offers for DVD rentals ($1.50 for Blu-ray).

As for the potential by-mail movie business itself, it is useful to look at Netflix’s subscriber base. Netflix ended 2013 with just less than 7 million DVD subscribers, down from more than 8.2 million at the end of 2012 — a decline of 15.7%. Those lost subscribers may be ripe for GameFly.

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