Blockbuster changes Total Access terms after loss
JULY 26 | Blockbuster reported a $35.3 million second-quarter loss and made a move toward improving profitability by changing the terms of its Total Access program, limiting the number of in-store exchanges a customer can make before being charged more.
Blockbuster is emphasizing the limit to five in-store exchanges per month for its most popular plan, the unlimited online rentals of three movies out a time for $17.99.
But if a customer wants to stick with unlimited in-store exchanges, the price leaps to $24.99, according to the company's Web site, effectively a $7 price hike. That plan is now called Total Access Premium.
Analysts had been expecting a price hike, but the shift to an in-store exchange limit emphasis was largely a surprise.
James Keyes, Blockbuster's new chairman and CEO, was somewhat vague about the term changes during the company's conference call with analysts on second-quarter results, as was a press release on the changes issued shortly after the call.
Rather than characterizing the modifications as a price hike, Keyes stressed the limit on in-store exchanges. If a customer on the $17.99 plan wants to make more than five in-store exchanges per month, an additional $1.99 per rental will be charged, he said. Customers who subscribe to the online-only Blockbuster by Mail program also will have that option, he said.
According to the press release, customers will now be able to exchange their online rentals for discounted in-store game rentals in addition to movies. Previously, Total Access members had the option to get one free game rental per month through a once-per-month coupon.
Blockbuster announced it increased its subscriber count by 600,000 in the second quarter to a total of 3.6 million subscribers, more than 3.3 million of them paid. Netflix, in contrast, lost subscribers during the quarter for the first time.
But Blockbuster's subscriber increase came at a cost of about $50 million in the quarter, chief financial officer Larry Zine said.
Blockbuster will now suspend its marketing spending on the online program, according to Keyes.More Here