The company joins Netflix and Wal-Mart in offering movie rentals without return dates for a monthly fee.
By DAVE GUSSOW
Published June 5, 2004
Time seems to be running out for late fees for movie rentals.
The latest to offer a subscription service that lets people check out a certain number of movies with no time limit and no penalty is none other than Blockbuster Video with its new Movie Pass program.
"The important thing is, we're offering another option," said Jerianne Thomas, Blockbuster's director of marketing and public relations in Dallas. "It's all about lifestyle and timing and schedules."
In short, consumers want flexibility in case they can't get to their rented movie right away, Thomas said. For $24.99 a month, subscribers can check out two movies at a time, and keep them for as long as they want. For $29.99, they can have three. It's available at all Blockbuster stores. Either way, they can check out and return as many movies in a month as they like. People also may continue to rent by the movie, as they have been.
Blockbuster's move comes as the DVD rental market is undergoing a transformation. Blockbuster still dominates but faces increasing competition from companies such as Netflix, an online movie rental service, and Wal-Mart, which also is offering online rentals delivered by mail.
In addition, rentals are down as much as 16 percent this year, according to Video Store Magazine, as sales of inexpensive DVD movies cut into the market. And even some cable TV companies are considering offering video on demand by subscription, according to Kurt Indvik, editor in chief of Video Store Magazine.
"It's a model that's attractive on a number of media levels because of convenience and the up-front revenue that companies can generate," he said. "The question is whether you're taking a $40-a-month customer and converting to a $25-a-month customer."
Late fees, or "extended viewing fees" as the industry euphemistically refers to them, contribute 10-12 percent of revenues, Indvik says. While a substantial chunk of change, they're something consumers loathe and the industry tries to soft-pedal.
"It does stick in people's craw," Indvik said. "That's one of the reasons Netflix touched a nerve, the ability to not have to worry about that late fee and worry about getting a video back in time."
Blockbuster's Thomas says Movie Pass was not developed because of customer complaints about late fees, but rather is the first step in a three-part plan. Next will be an online rental service with delivery by mail, similar to Netflix, and in 2005 the company will integrate everything so consumers can rent online or at stores and return by mail or at stores.
While $24.99 to have two movies out at once is higher than Netflix's $21.95 for three and Wal-Mart.com's $15.54 for two, Thomas says Blockbuster's research shows it to be competitive.
"A set price allows them to budget their entertainment," Thomas said. "We know from the tests that we did customers can rent an average of 10-12 movies a month."
For its part, Netflix has said it built its business on people who don't like Blockbuster's lines, late fees and selection. Its growth has continued, passing 2-million members, even though it announced in April a $2 price increase to $21.95 that goes into effect this month.
CEO Reed Hastings said in January that Netflix's goal is to reach 5-million subscribers by 2007. Eventually, he said, downloading movies from the Internet will be an option.
At Wal-Mart.com, the most popular rental plan is $15.54 to have two movies out at once, said spokeswoman Amy Colella, and pricing will remain the same.
