Blockbuster (NYSE: BBI) is boosting prices at its Total Access service, which lets customers rent DVDs over the internet and in stores. During last quarter’s conference call, the company said it was taking a bath on the service, while placing the blame on customers that abused the system — technically, it described them as “price sensitive” and “heavy consumption.” Thus in determining the price hikes, a company spokesperson told AP: “We are taking into account the profitability of individual subscribers.” Basically, the company had already tipped that it would do something to staunch the bleeding, and now we know what that is. The money-losing scheme was seen as a potent competitive weapon against Netflix, (NSDQ: NFLX) as it offered the same DVD-by-mail service with the added benefit of in-store pickup and return. Meanwhile, Reuters reports, Blockbuster will cut prices, at least for a limited time, on its Blockbuster By Mail service, which is a pure Netflix clone without the in-store option.
The price hikes are seen as good news for Netflix, whose stock is up sharply over the last two days. On its last conference call, CEO Reed Hastings described Blockbuster’s then strategy as “selling dollars for $0.85.”