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The timing of the Dish Network’s and Blockbuster’s introduction of new a streaming video venture couldn’t be more perfect. With Netflix (NSDQ: NFLX) reeling from subscriber losses and discontent after successive PR failures following the move to a bifurcated DVD/streaming video pricing and branding system, this deal could represent Blockbuster’s best chance for a comeback since Dish bought it for the bargain price of $320 million in April.
Dish CEO Joe Clayton began the press conference noting that Blockbuster’s brand may be tarnished on Wall Street, and in the media, but to “Main Street, the Blockbuster name means something of value to families.”
The new product, dubbed the Blockbuster Movie Pass, launches a week from Saturday. It promises a complete integration of Blockbuster and Dish by offering DVDs by mail and streaming access as an add-on to Dish subscriptions. That includes 3,000 movies streamed to the TV, 4,000 streamed to the PC, 20-plus streaming movie channels and 100,000 movies, TV shows and games by mail. At first glance, the competition would seem to have little to worry about, if the contest is judged by the streaming numbers game: Netflix has 20,000 titles available for instant streaming, while Amazon offers about 9,000 through its Amazon Prime Instant Video service.
What do Dish Network (NSDQ: DISH) customers get for it? On top of the authenticated content they get through Sling, there will now be and games discs via Blockbuster’s own mail rental service. Even so, it’s the streaming offer that’s intended to help Dish attract new customers, Clayton said. In addition, Clayton said this isn’t just about movie rentals and streams, it also involves access to thousands of game rentals through Blockbuster (NYSE: BBI).
The Blockbuster Movie Pass will cost current Dish subscribers $10 a month as a starting rate that includes one DVD rental at a time; for a limited time, it will be included on some tiers for new subs at no extra charge. The pricing is tiered, with the next level set at $15 and the premium version available for $20 a month. Netflix split its DVDs from streaming Sept. 1, charging $8 for streaming and $8 for one DVD at a time. Later this year it literally will spin off DVDs to a new business internally, Qwikster, creating dual accounts and sites for anyone who wants both services.
Separately, each Netflix service is 20 percent lower than the monthly Blockbuster Movie Pass fee but when the combined cost is taken into account, Blockbuster comes in far lower. That’s only on the service, though, since only Dish subscribers have access and they have to pay monthly fees to even qualify. The truer test will be when Blockbuster comes out with its promised streaming-only service available to non-Dish subs, but based on today’s comments, that won’t be soon.
In terms of revenue, Dish is also counting on some ad support for the streams.
Michael Kelly, president of Blockbuster, offered a glimpse of the progress the companies have made together since the acquisition five months ago. “The hero of the Blockbuster brand has always been the store,” Kelly said, noting that there are still 1,500 brick-and-mortar shops still operating. “We’ve been working on improving the in-store experience and increased traffic to the locations 100 percent over the past five months. In light of the changes in the marketplace, we’ve signed up 500,000 new members over the past few months.”
Kelly also pointed to the Facebook integration that was announced yesterday.
During the Q&A, Kelly said that the bundling of streaming with satellite is key to arrangement, so don’t expect a standalone streaming service not connected to Dish any time soon.
“Serendipity” played a role in the timing of Dish’s reduced pricing, Clayton noted, when asked about the recent problems Netflix has faced as a result of its price hike last month. “Sometimes, all the best planning can’t replace luck,” he said. “We’ve been aware of some of the tension in the marketplace over pricing for some time. But we’ll take luck too.”
While the Blockbuster Movie Pass service could help Dish attract new subscribers, at least at this point, it cannot be considered a direct challenge to the standalone services offered by Netflix and Amazon (NSDQ: AMZN). On that level, some disgruntled Netflix consumers may ultimately choose to go with Dish instead. But as more cable and satellite companies offer increasing ways to view on-demand video, the Dish/Blockbuster combo will simply represent one of many programs that use streaming to lure pay TV subscribers.
More about pricing: New subscribers who commit to a two-year plan for the America’s Top 200 package or higher before Jan. 31, 2012, get the first year of Blockbuster Movie Pass included. (Dish calls this $360 in savings — $20 a month discount plus the waived streaming/DVD fee.) New subs who get the America’s Top 120 package, which runs $30/$45, get three months free. Subscription streaming access requires a Dish Network HD DVR. The equipment usually comes with a new subscription but using the DVR runs $6 a month. The fee is waived for the first DVR.
Here’s how Dish and Blockbuster management explained the new deal at a San Francisco press conference: