Dish takes Blockbuster shot at reeling Netflix

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SAN FRANCISCO (AP) - The Blockbuster video store chain is seeking some revenge against old nemesis Netflix by offering a less expensive way to watch videos online and rent DVDs through the mail.

The attack announced Friday is being mounted by satellite-TV provider Dish Network, which bought Blockbuster out of bankruptcy court for $234 million five months ago.

Blockbuster, once the video rental king, had filed for bankruptcy when it couldn’t counter the threat posed by Netflix Inc., whose DVD-by-mail service and subsequent expansion into Internet video streaming revolutionized home entertainment.

Netflix now reigns as the largest U.S. video subscription service with about 24 million customers, but it’s in a weakened position after raising prices as much as 60 percent and announcing the spinoff of its DVD-by-mail service as “Qwikster.” Those moves, made in the past two months, have triggered a Netflix customer rebellion that Blockbuster and Dish Network Corp. are preying upon.

The lure: a DVD-by-mail and Internet video package that Blockbuster and Dish Network are selling for as low as $10 per month. That’s the same price Netflix charged until it split its streaming service from DVDs.

But there’s a big catch. To get Blockbuster’s new “Movie Pass,” you have to subscribe to Dish Network’s pay-TV service. Dish Network currently has about 14 million subscribers, but only half have the right set-top box to stream video, said Ira Bahr, the company’s chief marketing officer.

In an attempt to widen its audience, Dish Network is dangling a one-year offer for $40 a month that will include more than 200 TV channels and the Blockbuster Movie Pass. The company eventually plans to offer Movie Pass to non-Dish subscribers, but it provided no details Friday.

Movie Pass will roll out to Dish subscribers Oct. 1, accompanied by a marketing blitz.

It appears to be an ideal time to introduce the service because so many Netflix customers have been canceling their subscriptions and exploring other options. Netflix expects to have 600,000 fewer U.S. subscribers at the end of this month than it did at the end of June, only the second time in its history that it has lost customers from one quarter to the next.

The only other time that happened was in 2007 when Netflix and Blockbuster were locked in a fierce price war. Blockbuster eventually retreated, buried in huge losses and debt.

Dish Network executives described the timing of the new Blockbuster service as serendipitous. The companies, the executives said, had been drawing up their plans well before Netflix enraged customers with its mid-July announcement about the price increases.

“No amount of planning can replace good luck,” Dish Network CEO Joe Clayton said. “We will take all the luck we can get.”

Netflix still sees its service as a better bargain because it doesn’t require a satellite-TV subscription.

“We don’t require a cover charge,” Netflix spokesman Steve Swasey said. “That (Movie Pass) isn’t a good value.”

J.P. Morgan analyst Doug Anmuth wasn’t impressed with Movie Pass either. “We don’t believe the service poses a compelling alternative to broadly compete with Netflix at this point,” he wrote in a Friday note.

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