In a further advancement into domain once solidly controlled by Netflix, Blockbuster today introduced an Internet Only DVD rental service. The new service, which is being called Blockbuster By Mail, will be distinct from Blockbuster’s combined Mail-order and In-store service (called Total Access).
Unlike Total Access, subscribers to the new “By Mail” service will not be able to rent titles from retail stores as well as online. They will, however, be able to return to their local stores, or by mail. Use of the retail footprint for returns will theoretically increase turn-around time for some users.
The news is troubling for Netflix. Not only are they facing potential competition from download rental services (Amazon/Tivo Unbox) and Apple (still negotiating to get into the business), they are losing market share rapidly to Blockbuster which has been on an aggressive offensive. In April, Netflix cut its year end subscriber forecast by around ten percent. Meanwhile Blockbuster, which has about half the current subscribers as Netflix, is projecting 43 percent subscription growth for the year.
The By Mail service will be offered at several different price tiers. A three videos out at a time plan, offered at $16.99 a share will directly undercut Netflix’ service offering, and to add insult to injury, offers it at a lower fee.