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

Blockbuster announced this morning that it has struck a deal with Warner Bros. guaranteeing it a 28-day head start over Netflix and Redbox 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 and Wal-mart. 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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