Blockbuster Inc. launched an Internet-based DVD rental service yesterday called Blockbuster Online.
The move pits the Dallas-based company against Netflix, which was one of the first online subscription services for DVDs and has quickly become the industry leader.
Blockbuster offers many of the same benefits as Netflix, including the ability to rent unlimited DVDs, up to three at a time, for one monthly fee and no shipping charges. Blockbuster will charge $19.99 monthly for its service. Netflix recently raised its fee from $19.99 to $22 monthly.
Blockbuster Online users can choose an option that lets them have five DVDs out at a time for $29.99 and eight DVDs for $39.99.
As a retail-based company, Blockbuster also can offer benefits unavailable to Netflix customers. Blockbuster Online customers will receive coupons for two in-store rentals each month. Next year, the company expects to integrate its in-store subscription service, which was introduced in May, with Blockbuster Online, letting customers return a DVD they rented online while inside one of its stores.
“Our goal is to capture a large share of online customers by the end of 2005,” company spokesman Randy Hargrove said.
Blockbuster began test marketing the subscription service in July and found that 40 percent of online customers rent in stores each month. This is why Blockbuster Online will give customers coupons for two free in-store rentals each month.
The online subscription business brought in $280 million in sales in 2003 while the U.S. movie rental industry rang up $8.2 billion.
To handle order fulfillment, Blockbuster set up 10 distribution centers nationwide. But once the in-store and online subscription services are integrated, Blockbuster expects to mail recent releases from local stores and offer next-day delivery. Older titles will be shipped from the distribution centers. The company is telling customers they can expect their rentals to arrive two days after Blockbuster ships them. In some places, such as Alaska, it may be three days.
MSN and AOL will promote Blockbuster Online through banner ads and promotional links. Blockbuster Online users soon will be able to manage their online movie lists from MSN and AOL.