NEW YORK — Blockbuster fired on Tuesday one of its bigger shots yet against Netflix, announcing a plan to allow customers of its online service to return movies in stores.
Service will allow customers to immediately clear their rental queue when they return a disc to the store and eliminate the wait time before the next movie is shipped.
Blockbuster hopes the new plan will lure Netflix customers away from the wildly popular mail-order service. One hurdle Netflix has faced is retaining customers who find that the time it takes for a viewed movie to be shipped and received, and a new disc to be shipped and received by the customer, is longer than they’d like, leaving them with fewer movies per month than expected.
In an interview, Blockbuster chairman-CEO John Antioco admitted that the plan, called Total Access, will cost the company more than the previous system, in which physical and online operations were kept separate. But he said it was necessary if the company hopes to beef up its subscriber numbers.
“It will raise our product costs,” he said. “But it will provide incremental traffic to stores,” while at the same time it will “reduce churn and increase sign-ups without incremental advertisements.”
As part of the service, Blockbuster is giving customers a free rental if they return a movie ordered online in stores.
Blockbuster has a long way to go to catch its main competitor. At present, Netflix, with nearly 6 million customers, has a nearly four-to-one advantage in online subscribers.
Move marks Blockbuster’s biggest effort yet to leverage its brick-and-mortar locations against a thus-far nimbler opponent. In fact, until now physical stores have been perceived as a disadvantage since they offer consumers less selection and convenience, and require more overhead, than a pure online model.
Wall Street weighed in positively on the move, sending the company’s stock price up 4%, including after-hours trading.
But Blockbuster’s move is also risky because it increases the volume of renting, which drives up a company’s costs.
One commentator on investor site Motley Fool wondered if “Blockbuster know(s) what it’s getting itself into here. Its new approach is aimed at appealing to the more hyperactive renters at Netflix, and that’s an audience that Netflix will gladly hand over.”
Some experts likened Tuesday’s move to the homevid retailer’s decision to eliminate late fees. That step also aimed to make inroads in Netflix’s base by increasing customer satisfaction but resulted in millions of dollars in losses and proved to be a disaster on Wall Street.
And even as execs were touting the advantage of having physical stores, they were also flogging the future of the homevid category.
“We think this gets us one step closer to another service that’s inevitable for Blockbuster — digital delivery,” Antioco said, noting company’s brand and relationship with customers.
Antioco also said the company may increasing its selection in stores; with an average of 6,000 movies, they tend to carry only a small fraction of what both its own and Netflix’s warehouses stock. He also said firm wants indie films and other specialty fare, which Netflix has excelled with, to become a bigger priority.