Blockbuster Online Increases Monthly Prices

Blockbuster Online recently increased the rate of their monthly service, and notified customers with an email explaining the change. Of course one of my favorite websites, The Consumerist, picked up on it and made this post:
http://consumerist.com/336209/blockbuster-total-access-is-raising-your-rates

Highlights in bold:

We like this part: “The benefits of your subscription plan will remain the same…and it’s a value of $34.99!” Oh really? Is that similar to the set of knives that are an “over $200 value” for just “one easy payment of $19.99?” Because I saw those on TV, and I was really wondering how they figured out that set of knives had a $200 value. Maybe Blockbuster knows.

You know who else knows? Math. The 19.99 plan allows 3 movies out at a time and unlimited online rentals. The big uproar is that the plan, in addition to going up by 2 dollars, limits in store exchanges to 5 per month, whereas before it was unlimited. If a customer in one month gets 3 movies in the mail, exchanges all three at the store, gets 3 more in the mail, then exchanges 2 of those in the store to hit the exchange limit, he ends up watching 11 movies. Assuming those are new release movies, which rent for $4.25 at my local Blockbuster, the customer is actually getting $46.75 worth of movies, which is more than what Blockbuster was claiming! Even if those movies were actually from the Blockbuster favorites catalog (released more than 1 year ago), the total value of the package is $32.89 (2.99 per rental in store).

It’s no secret that Blockbuster is losing money every month with their online service. Google it and you can find plenty of articles detailing just how much this program is eating into their bottom line. What would you expect them to do? A follow up post on The Consumerist listed out some of the reactions from customers upon receiving the price increase email: http://consumerist.com/336226/you-really-really-hate-blockbuster-for-raising-prices

Highlights:

"I don't know what planet you are from, but the marketing technique of "make the company richer at the expense of existing customers" does not translate well to consumers. I would understand a price hike for new customers, but to slap your current customers in the face with these OUTRAGEOUS prices is absurd. This is especially true when said consumers can get a drastically better deal from your competitor and they are still dropping prices. Have you thought about how your pricing plans compare with Netflix, your main competitor in the online movie rental industry? Its no wonder Blockbuster has lost so much money in the past quarter. Not to mention losing over half a million customers." –Kris

Hi Kris, I am pretty sure they hail from the planet where allowing a customer that costs you far more than you will ever get back to continue to bleed you out of money is NOT a good business deal. Yes they will lose your business, which means they will stop losing money on you. And I wouldnt call the $3 price difference with Netflix a "drastically" better deal, since its only $3, and you get 5 in store exchanges with the Blockbuster plan.

i just got this email from blockbuster, this sh#$ is getting rediculous?!? i was happy with my 14 dollar plan with unlimited trades, now im going to be paying 20 bucks a month for 5 trade ins and a lousy 4 movies a month? what a scam! –Chris

Hello Chris with a Ch, The only 20 dollar plan Blockbuster Online offers is unlimited online rentals (3 at one time) with 5 trade ins per month.

I have been using blockbuster online now for a few years and have been enjoying instore exchanges. Back in July they changed their subscription plans, but to my suprise i was grandfathered in under my old plan and was told i would not have to change my plan (at this time). Well last night was time. I got an email saying the price would go to 19..99 from 17.99 and only get a limited number of instore exchanges. Granted i probably use about an average of about 4 instore exchanges a month (some months i use 10 but some i use 1), but this might be the straw that breaks the camels back and send me BACK to Netflix. -Will

Hi Will, Go back to Netflix. For 16.99 per month, you will get unlimited online rentals with 3 out at a time. For 3 dollars more at Blockbuster, you would get the same thing but would continue to be able using the 4 exchanges each month, which adds a value (hello again, math!) of $17 to the package.

As I have explained to Blockbuster before, I am sorry that I signed up for their offers and made them so successful, but I won't do it anymore. I'm going back to Netflix ASAP. -Greg

Hi Greg, You made them so successful that they lost money in the 3rd quarter. Actually, you will personally lose them money every month that you remain an active subscriber on the old plans, which isn’t much of an incentive to keep you around. Netflix isn’t hemorrhaging money on its customers every month because they don’t have to worry about in store exchanges, so I am sure they will be glad to have you as a customer.

Blockbuster is now trying to raise out rate by two bucks a month after sending an e-mail a couple months back telling us our service nor price was changing. They really know how to keep customers! I'm out of there! -Wayne

Hi Wayne, If you had a customer that cost you $2 a month, would you a) keep him and just keep losing money, b) adjust his price and plan to try to actually make $2 a month, with the risk that he might leave and provide you with no money each month, but also not cost you anything?