Introducing Blockbuster Partial Access
Back around November 2006, Blockbuster announced their “Total Access” program.
You may have missed it…assuming that you never watch television.
If you do watch television, you were bombarded with commercials where they try to explain, in 30 seconds, how much better they are than Netflix because with “Total Access” you can return Blockbuster Online movies to your local store, which lets you A) get your next movie faster and B) get a free in-store rental for each movie that you return. They did this at the same price structure that Netflix had.
During the college football season (when watching live TV meant that I unfortunately saw a lot of commercials), it was downright obnoxious how many times this ad was on, over and over and over and over. How often did these commercials run? Put it this way, in the time it takes Austin Powers to pee, it would have been on 3 times.
Well, 8 months after the initial launch of “Blockbuster Total Access” they have made some changes, where by “some changes” I mean, they are going to charge you a whole lot more to get…. well, nothing more than what you’ve had for 8 months.
The new program, which I’ll refer to as “Blockbuster Partial Access” aka “Please Stop Using That Thing We Kept Telling You About” aka Ixnay on the In-Store Returnay (that last part might be a bit wrong, I haven’t had Pig Latin since high school and I’m a bit rusty) was announced in an email I received today.
I will translate it for the PR-Speak Impaired.
Dear Timothy,
“I called you by your name. That means I respect you.:”
We have introduced a new pricing structure for our lineup of subscription plans.
“Do me a favor and just bend over, take a deep breath, and relax. I’ll be gentle, I promise. Remember, your safety word is ‘Boise.’”
As a result, the price of your current monthly plan Unlimited DVDs up to 3 at a time with unlimited in-store exchanges each month for $17.99 will increase to $24.99, effective August 1, 2007.
“It only hurts a little at the beginning. Trust me. Bite down on this if you need to.”
We will not automatically renew your subscription on your next billing date.
“You can always leave if you want.”
If you choose to continue, please select a new plan.
“I know you want more, but how far are you prepared to go?”
We appreciate your business and hope to continue meeting your movie and game rental needs at one of our neighborhood BLOCKBUSTER® stores.
“Netflix will never love you as much as I do. Netflix thinks you’ve out on some weight lately. Yeah, he was talking to me about it the other day.”
Thanks for trying blockbuster.com!
“I’ll call you.”
Please contact us at http://www.blockbuster.com if you have any questions or concerns.
“You’ve got my number right? But just the cell, don’t call at home. Or work. Definitely not at work.”
Bring on the Rate Plans
So what is this “new pricing structure for [Blockbuster’s] lineup of subscription plans”?
See here:
For those with poor memories or who may not have known, you might want to checkout the screenshot of their previous rate plans (as of a month or so ago up until yesterday) which I posted as part of Blockbuster Plans: Deal or No Deal? back in mid-June.
Let’s look at the old and new charts combined:
| Blockbuster | Unlimited In-Store-Exchanges (Then) | Unlimited In-Store Exchanges (Now) | Limited In-Store Exchanges (Now) | No In-Store Exchanges (Then/Now) |
| 4 at a time | $24 | n/a | n/a | n/a |
| 3 at a time | $18 | $25 | $18 (5 exchanges per month) | $17 |
| 2 at a time | $15 | $22 | $15 (3 exchanges per month) | $14 |
| 1 at a time | $10 | $17 | $10 (2 exchanges per month) | $9 |
| 1 at a time (max 3 a month) | $8 | n/a | n/a | $7/n/a |
| 1 at a time (max 2 a month) | $6 | n/a | $8 (2 exchanges per month) | $5 |
In the email I received, it sounded like my only real option was to pay them 39% more every month. Now I see that there is still a rate plan for $18/month, but it’s limited to 5 in-store exchanges per month.
What that means: fewer movies, slower turn around time.
Here’s what an average week has been with Blockbuster Total Access (henceforce known as “BTA”) .
- 3 movies are mailed to me on Monday.
- They arrive Wednesday or Thursday.
- Sunday after church we go to Blockbuster and return the 3 movies we received in the mail for 3 in-store rentals.
- The store scans the movies I returned, Blockbuster Online registers that they are back and sends 3 more movies to me on Monday.
I have rented about 120 movies going back to 22 May 2006. Let’s call it 14 months at $18/month ($252, plus tax) so we can use round numbers.
That’s about $2 per movie ($1.9842519685, plus tax).
It’s about 2 movies per week.
It’s about $4.20 (plus tax) per week.
(For comparison, it costs $4.50 to rent a movie at the Blockbuster store plus $0.30 tax.)
Here’s a breakdown of my movie renting habits before BTA (online rental/in-store exchange):
| Month | Movies Rented |
|---|---|
| May - June | 9 |
| June - July | 11 |
| July - August | 11 |
| August - September | 8 |
| September - October | 6 |
45 movies for $90 (plus tax) which is pretty much spot on $2/each.
| Month | Movies Rented |
|---|---|
| October - November | 11 |
| November - December | 6 |
| December - January | 7 |
| January - February | 7 |
| February - March | 5 |
| March - April | 6 |
| April - May | 11 |
| May - June | 13 |
| June - July | 9 |
Personally I was surprised that the number of online rentals hadn’t really changed all that much before or after BTA. I suspect I know the reason.
Before BTA, I would watch a movie as soon as I got it so I could get it in the mail the next day. Now we get them on Wednesday or Thursday and I drop them off at the store on Sunday. So they aren’t getting back any faster, but I’m keeping them longer and don’t have the pressure to watch them as soon as they arrive.
The other part is that it was frustrating because I’d send a movie back and it would take several days before it would be recorded as having been received. I could send two movies back on the same day and one would be logged in the next day and another would take 2 or sometimes 3 days before it was received and processed.
So why would Blockbuster do this?
Looking at the Rental History for the BTA period, there are 75 movies for $162 ($18/month * 9 months) which is more than $2/each.
But (and it’s a big one), each of those 75 movies has been exchanged in the store for an in-store rental, so it’s really 150 movies for $162, which is barely over $1/movie.
End result? Blockbuster is hemorrhaging money.
Marketwatch.com wrote Netflix profit rises; net subscriber change declines on 23 July, and had this to say:
Netflix’s problem, in Pachter’s view, is that the company behaves as if it is playing a zero-sum game. “No one ever said that Amazon was going to put Best Buy out of business, yet everybody’s always said Netflix is going to put Blockbuster out of business. And that’s just stupid.” Netflix is waiting for Blockbuster to raise prices and slow down the pace of Total Access subscriptions, Pachter said, and it is not an ideal business model to be “…waiting for your competitor to do something,” he said. “For one thing, it presumes that Netflix understands Blockbuster’s business model better than Blockbuster does, and that’s highly unlikely.” [And yet that’s what they did, a week later - TjL] During Monday’s call, Hastings reiterated the company’s view of Blockbuster’s strategy, while acknowledging a certain adjustment in that assessment. “By literally giving away the store, [Blockbuster] has gained online subscribers at the cost of big financial losses,” Hastings said. “Earlier this year, we thought Blockbuster might sustain these steep financial losses for a quarter or two … at this point, however, we believe it is prudent for us to assume that Blockbuster stays in the online growth-over-profits mode as long as they can. And therefore we are adapting our competitive posture by shifting some profits to defend our share.” [Ooops. Then Blockbuster went and changed the game again - TjL] Hastings said its latest price cuts will essentially be financed through lower marketing spending. “At some point, our competitor will likely desire at least a modest profit on their online service,” the CEO added. “And we expect Netflix to enjoy greater growth and profitability at that time.”
A few days later, in Blockbuster swings to loss, we were told:
“Although Blockbuster Total Access allowed us to increase our subscriber base … the costs associated with the program affected our profitability,” said Jim Keyes, Blockbuster’s newly appointed chairman, in a statement. “While we remain committed to capturing market share in the overall video-rental market, we are absolutely focused on striking an appropriate balance between growth and enhanced profitability going forward.” Toward that end, Keyes said the company is modifying the structure of Total Access to maximize its profitability.
Bottom line is that it’s all about the bottom line.
Taking the same mumbers for the past 9 months and putting in the new rate plan, I would have 150 rentals for $225, which is $1.50 per movie.
Assuming I want to spend about the same as I spent before ($18), my options are 3 at a time with a limit of 5 in-store per month ($18) or 1 at a time with an unlimited number of in-store exchanges ($17). Assuming that the latter would give me 1/3rd of the rentals I’ve had over the past 9 months, I’d be spending $17 * 9 months = $153 for 50 rentals which is about $3 per rental, which is still a deal over renting them straight from the store, but a terrible deal compared with what I’ve had.
The real question seems to be: given that I’m getting between 5-13 movies a month, do I want to be able to exchange all of them in-store or not? To me one of the biggest considerations isn’t getting a free in-store rental as much as the turnover speed for getting my next online movie. Is that worth $7/month?
Good question, and one I’ll have to answer in the next few weeks.
One last factor: how many more movies are at my local Blockbuster store that I really want to rent? Except for new releases, there’s not much on the shelves I’m interested in.
2 Responses to “Introducing Blockbuster Partial Access”
on 31 Jul 2007 at 7:13 pm # Sean S
Wow, you are certainly a movie watcher. They probably used your account in their board meetings while reviewing the numbers.
I dropped Blockbuster like a bad habit last month when they wouldn’t let me return a movie I had rented in-store, without paying for it in full. I had kept it longer than 30 days, taking full advantage of the no-late-fees policy that was so gloriously touted in their TV ads last year. I wasn’t so upset at the policy as much as the way the personnel handled the situation — making me feel like a complete idiot.
Needless to say, I also immediately cancelled my Blockbuster online account, too. Sorry, Blockbuster, I don’t need to watch movies that bad.
on 11 Sep 2007 at 6:00 am # Jesse D
You can still return the envelopes to the store to decrease turn around time without getting a free in-store rental. I always put mine in the drop slot on my way to work. If it’s a weekday my next mailer is more often than not shipped that same day.
Also, if you have one of the limited plans and you’ve reached your limit of free in-store rentals you can still use the mailer to get an in-store rental for $1.99 + tax.
… and to Sean S:
I had this problem one time when a movie I rented got dropped behind my entertainment center. I thought it was more than fair that I should have to keep and pay for the movie I kept for almost 2 months. You can’t seriously expect to “take full advantage” of the policy if you don’t actually KNOW THE POLICY. Read your receipt. It’s in black and white. I think it’s perfectly fair to be able to keep a movie for 36 days past the due date for an extra $1.25 + tax. It’s people like you who make rental rates go up for the normal people who can manage to watch their RENTAL and return it within a reasonable amount of time when they’re done.