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When Netflix, which lets viewers rent DVD's online and receive them by mail, went public in May with a $94 million stock offering, the event was hailed by some as a sign that dot-com shares might again be worth more than a good laugh.
But when Netflix shares nose-dived early this month on word that Blockbuster, a subsidiary of Viacom, had begun testing a competing subscription service through its stores, the potential Netflix story line began to sound familiar: a popular Internet debutante meets traditional company in dark alley; emerges with no friends and a balance sheet in serious need of medical attention.
Blockbuster's subscription service is in the early stages, although company executives said last week that the effort was proceeding nicely. The service, tentatively called DVD Freedom Pass, allows store customers to rent an unlimited number of titles each month for between $20 and $25 a month, depending on the city. Customers may have up to three titles out at any time, and are not assessed late fees.
Blockbuster also tested a service allowing consumers to go online and rent videos from their local stores, for in-store pick up. That service, too, was not profitable enough to roll out widely. "The same goes for the online subscription model," Mr. Klose said. "We've been looking at this stuff for a couple of years, and we're constantly watching that to see if something breaks loose there."
The competition between the two companies remains limited, of course, since Blockbuster is unlikely in the near future to move into the mail order rental business. But if the Netflix service takes off, that strategy could shift quickly, since Blockbuster has acquired a business that specializes in mail-order rentals, according to one person close to the company. (A Blockbuster spokesman declined to comment, and because the acquisition was not considered material to Blockbuster's business, it has not been publicly disclosed.)
Mr. Hastings of Netflix says he is likewise watching Blockbuster closely, but is perhaps more vigilant of Wal-Mart Stores, which he said, "is actively working on" a competing online rental service. A Wal-Mart spokeswoman declined to acknowledge such an effort.
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But when Netflix shares nose-dived early this month on word that Blockbuster, a subsidiary of Viacom, had begun testing a competing subscription service through its stores, the potential Netflix story line began to sound familiar: a popular Internet debutante meets traditional company in dark alley; emerges with no friends and a balance sheet in serious need of medical attention.
Blockbuster's subscription service is in the early stages, although company executives said last week that the effort was proceeding nicely. The service, tentatively called DVD Freedom Pass, allows store customers to rent an unlimited number of titles each month for between $20 and $25 a month, depending on the city. Customers may have up to three titles out at any time, and are not assessed late fees.
Blockbuster also tested a service allowing consumers to go online and rent videos from their local stores, for in-store pick up. That service, too, was not profitable enough to roll out widely. "The same goes for the online subscription model," Mr. Klose said. "We've been looking at this stuff for a couple of years, and we're constantly watching that to see if something breaks loose there."
The competition between the two companies remains limited, of course, since Blockbuster is unlikely in the near future to move into the mail order rental business. But if the Netflix service takes off, that strategy could shift quickly, since Blockbuster has acquired a business that specializes in mail-order rentals, according to one person close to the company. (A Blockbuster spokesman declined to comment, and because the acquisition was not considered material to Blockbuster's business, it has not been publicly disclosed.)
Mr. Hastings of Netflix says he is likewise watching Blockbuster closely, but is perhaps more vigilant of Wal-Mart Stores, which he said, "is actively working on" a competing online rental service. A Wal-Mart spokeswoman declined to acknowledge such an effort.
Click here for the full story
