Man, Blockbuster Online is Doomed. You know, one of the harsh lessons I learned about life at a young age is that sometime you can do everything right… and still lose. Remember that episode of Star Trek The Next Generation where Data plays Kolrami in a game of Strategema and loses? Yeah… you can indeed do things right, and still not get the results you want. Such is the lesson that Blockbuster is learning right now.
Over the last year, Blockbuster Online has been making some brilliant moves in order to compete with Netflix. The policy of being able to return your mailed DVDs right to the store and getting free in-store rentals for doing it was GENUIS! However, even though they did things right… they’ve been losing the fight, and more importantly losing money. And today it looks like they’ve put the nail in their own coffin by announcing price increases of up to 40%.
Yahoo News gives us this:
The movie-rental giant began notifying customers of the increases — and some price cuts — early Thursday. The hikes of $2 to $10 will take effect next week and caused an immediate buzz on Internet boards. The immediate beneficiary of the move was rival Netflix Inc. — its shares jumped more than 9 percent. Blockbuster shares barely budged.
Blockbuster lost half a million online customers in the July-September quarter. Chief Executive James W. Keyes said last month that many of those subscribers were costing his company more than they were worth. The company spent heavily to advertise the online service, and it lost money when customers took their movies back to stores for free exchanges. While Blockbuster was losing online customers over the summer — and said it would stop reporting the number of subscribers — Netflix cut prices and added 286,000 subscribers, pushing it over the 7-million mark.
Even though it’s premature, I’m going to call this fight over. I’m not a business major, but even I know that raising prices by 40% while adding no additional value for the money, is NOT a good way to attract more customers. Blockbuster online is in a death spiral. It is a shame, because no matter how good Netflix is, competition is always good for the market and it forced Netflix to STAY good and improve. It will be interesting to see how Nexflix evolves once Blockbuster Online goes under (which will happen eventually).
