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Blockbuster’s Warner Bros. Deal Won’t Help It Beat Netflix, Redbox

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Blockbuster (s BBI) announced this morning that it has struck a deal with Warner Bros. (s TWX) guaranteeing it a 28-day head start over Netflix (s NFLX) and Redbox (s CSTR) for new release rentals. Through the deal, Blockbuster will get Warner Bros. DVD releases the same day that they go on sale in retail stores like Best Buy (s BBY) and Wal-mart (s WMT). That comes in stark contrast to deals that Netflix and Redbox have struck with Warner Bros. and other Hollywood studios, which seek to delay the availability of new release titles by four weeks.

Importantly, the deal isn’t just for rentals of Warner Bros. DVDs in Blockbuster stores, but extends to titles available through its DVD-by-mail service, as well as its on-demand streaming video rental service. That gives them an edge against Netflix, which also makes titles available by mail. Blockbuster wasted no time in bragging about the deal; the rental shop already has a front page ad — and a pop-up — on its web site touting the availability of The Blind Side in its stores. The Oscar-nominated film is the first Warner Bros. release that Blockbuster has a guaranteed 28-day window over the competition, but the rental firm will have several more such titles over the coming months.

Blockbuster’s DVD-by-mail program is priced comparably with Netflix’s service, each with one-DVD subscription plans for $8.99 a month, two-DVD plans for $13.99, and three-DVD plans for $16.99. But even with Warner Bros. releases available a month before they make it to Netflix’s DVD-by-mail program, it’s difficult to see Blockbuster making much of a dent in its competitor’s business. Netflix’s subscriber numbers are growing rapidly, based mainly on growing interest in its streaming service.

While Netflix’s streaming service is free as part of its subscription, Blockbuster’s new release rentals will continue to cost $3.99 online. That said, Netflix new releases in its streaming catalog, relying primarily on older movies, independent films and documentaries to drive interest in the service, while Blockbuster has Warner Bros. titles available for rental the same day and date they go for sale in stores.

The deal doesn’t allow Blockbuster to include Warner Bros. titles in its recently expanded kiosk program, so it won’t have much impact against Redbox. Like Redbox, Blockbuster’s kiosks enable users to rent DVDs for $1 a day. But with plans for 3,800 kiosks to be rolled out by year-end, its footprint is still much smaller than Redbox, which has more than 20,000 kiosks around the U.S. already.

Just as the deals struck between Netflix, Redbox and the Hollywood studios are unlikely to have much impact on DVD sales, it’s difficult to see the deal between Blockbuster and Warner Bros. doing much to prop up its dying DVD rental business. That’s because the vast majority of consumers just aren’t that aware of when DVDs are released — as Netflix CEO Reed Hastings said on his company’s fourth quarter earnings call, “For us, most consumers are not sure if DVDs come out 90 days after the theatrical release, 120 days, 150 days, 180 — it is all over the map… Subscribers are just not that aware of when DVDs come out relative to [their theatrical release].”

But even if they are aware of when a new title is released, will they be willing to plop down $3.99 for the instant gratification of renting a title day-and-date, when they can just wait 28 days and have it delivered as part of their Netflix subscription or pay $1 to rent it from a Redbox kiosk? Blockbuster — and by extension, Warner Bros. — is betting that they will.

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15 Responses to “Blockbuster’s Warner Bros. Deal Won’t Help It Beat Netflix, Redbox”

  1. wussel

    I do not understand why Netflix is hailed and Blockbuster bashed in almost every article. Just take this article: Netflix gets good marks for offering streaming at no cost (even when they stream only old stuff), but it is not mentioned that in Blockbuster Plans Blue Ray is included while this costs extra with any Netflix plan.

    I am eager to see what people are writing to bash Blockbuster when they offer free streaming of old stuff and offer new releases through kiosks. Maybe people could claim that the Blockbuster blue is too blue while Neflix red is just great and in a miraculous way makes Netflix better than Blockbuster.

  2. I am not sure why everyone is so down on Blockbuster.Their movies through the mail works great.I can usually get new releases within a couple days of release.They also have a very quick turn around time.

    It is also a lot easier to go two blocks to my post office instead of 8 miles out of my way to a red box.Streaming is a joke.Do you realize how much bandwidth it takes to stream a full 1080P HD movie.Most Blu-Ray disc or between 25 to 50 gigs.With Comcast 250 gig cap 5 to 10 movies would burn through my bandwidth for the month.

    Sure streaming my look good on a computer monitor or small tv.Try watching it on a 60 inch or larger tv or a front projection setup and see how it compares to a true 1080P source.It will be many years before this country has the bandwith for true Hd streaming movies.

    For now I will stick with physical media and enjoy my movies in full Hd video and sound.

  3. I will say this again and again.. Studios will always make more money off of Blockbuster. Blockbuster pays them per view and Netflix and Redbox pays for the Disc.

    Please tell me how this cannot hurt these two and help Blockbuster?

    Also netflix streaming has limits 1. Got to have computer 2. Can’t get anything near a new release(Blockbuster gets the newest releases)

    • Ryan Lawler

      Studios will make more money off Blockbuster as long as it survives. The problem is that its business doesn’t seem sustainable, and maybe the studios should think about finding new ways of making money rather than latching on to the old ways, which aren’t working.

      As for Netflix streaming — I personally don’t care about new releases, so I think Watch Instantly is great.

  4. Todd McKinney

    I agree with your basic premise – it doesn’t seem like a resounding strategic win for Blockbuster. I am, however, somewhat curious about the assertion that Warner is “betting” with Blockbuster. I don’t really know that much about Warner’s true motivation, but to me it smells a lot more like an a/b test.

    I would guess that there is a fair amount of searching for the best business model that’s happening on the content production side of things. I expect that Warner is calculating and intelligent enough to do something like “send this team off with flashlights, an interpreter but no weapons. Send the other team with flamethrowers but no food. Whoever survives shows us some elements of the winning strategy.”

    I would really doubt that Warner lives or dies on the success of Blockbuster. They may be thinking more along the lines of running a little experiment before the big blue brick and mortar bankruptcy.

    • tommy toon

      It seems that Warner is taking sides to prop the sales end of the bussiness. If all the studios claim that redbox and netflix eat into sales then it only make sense for them to back BB especially sinces they are like the last of the rental stores…If that argument is true about sales then it would seem that all the studios would be working to keep BB open and alive, you think one smart guy from all those studios would have given them some advice before BB got into all this trouble.. Hummm?

      • Ryan Lawler

        The problem is, rather than backing a legacy business — and one that is failing — wouldn’t it make more sense in investing to find new revenue streams for the future?

  5. Nomo Blockbuster

    Couldn’t agree more that Blockbuster will not win.

    Earth to Warner, it makes no sense to pair up with a company on the verge of bankruptcy instead of pairing up with companies that continue to surge and make Blockbuster and anyone affiliated with Blockbuster look like inept fools.

    Earth to Blockbuster, it makes no sense to have DVDs very temporarily available in stores that you are closing left and right instead of in copycat kiosks that you are supposedly rolling out non-stop. Blockbuster kiosks don’t have that same 28-day window that stores do and the stores are practically empty as it is, with respect to inventory AND customers.