Netflix arch rival Blockbuster will hold an event Friday, at which it has vowed to unveil "the most comprehensive home entertainment package ever."
The move by Blockbuster, now a division of satellite TV provider Dish Network, appears timed to exploit customer dissatisfaction with pricing changes at Netflix, dissatisfaction that has cost the company a million subscribers during the last three months alone.
Blockbuster is keeping the details of its event under tight wraps, but Bloomberg reported last week that the announcement would involve Dish Network subscribers getting Blockbuster's streaming service as part of their satellite TV package. But it's doubtful that Netflix’s current and former subscribers would be lured by a service that requires having a satellite dish added to their homes.
A more rosy scenario, if Blockbuster is serious about wooing disaffected Netflix subscribers, would be to offer its streaming service to them, sans Dish Network subscription. Better yet, offer them what Netflix took away from them: a combination DVD rental and streaming package for an attractive price, say $12.99.
Blockbuster's current rent-one-DVD-at-a-time plan sells for $9.99 a month; Netflix's is $7.99. But Blockbuster's package includes in-store returns and new release availability 28 days before Netflix, or Qwikster, as the DVD rental arm of Netflix will soon be called.
What's more, Blockbuster's streaming service has content that will soon be missing from Netflix: movies from the Starz and Disney networks. Add the DVD and streaming benefits together, mix with a generous dose of customer fury, and you have a recipe for a Netflix buster. But that will take a plan that's bolder than "buy a dish, get streaming free."
Blockbuster has tried to exploit Netflix customer dissatisfaction before. When the price hikes were initially announced in July, Blockbuster made a play for Netflix's DVD rental customers by offering them a 30-day free trial of the Total Access program. That's the $9.99 for one DVD at time, $14.99 for two, monthly plans that include in-store exchanges, timely access to new releases, video game rentals and Blu-ray movies at no extra charge. That program expired Sept. 15, which seems to indicate that it was a stop-gap measure until Blockbuster could launch a more comprehensive plan to tantalize Netflix customers.
Many business analysts have applauded Netflix's recent moves, as painful as they may be. Those analysts see DVD rentals as a dying business line. Separating DVD rentals and streaming is a good idea because it makes it easier for Netflix to dump the DVD business in the future.
The problem with that thinking is that the short-term losses Netflix is willing to take for what it sees as long-term gains may have been miscalculated. If, by treating DVD rentals as an unwanted child, Netflix gives a competitor, like Blockbuster, an opportunity to siphon off a substantial number of both rental and streaming customers -- streaming customers that Netflix apparently believes are the future of the company -- then those long-term gains may never materialize. That's what will make Blockbuster's announcement on Friday very interesting indeed.