Blockbuster Inc., a pioneer in video rentals, developed an extremely sound business model in the mid 1980’s. Buy VHS movies at bulk rates, rent them out to the public and after two or three rentals rake in the monster profits. Without competition from other major rental chains like the Internet or satellite and cable T.V packages that include hundreds of movie channels, Blockbuster had two things that every 101 economics student learns, supply and demand.
Blockbuster sailed into the 90’s building stores on every street corner they could find. With over 7,000 locations, the convenience of renting movies has never been easier. The pricing structure was fairly straightforward. Renting a new release meant a slightly higher price and less time to keep it as well as the fact that over 40% of Blockbuster’s annual revenue came from late and rewind fees associated with the rentals. Unfortunately for the big blue giants, the only way they saw increasing revenue was by building more stores; a decision that would ultimately lead to their demise.
With profits beginning to dip because of new technology and the Internet, Viacom decided to purchase Blockbuster in an attempt to reinvigorate the slumping company. Before Blockbuster was able to do anything productive, they were forced to play defense as Netflix was picking up steam. Online rentals were more convenient then driving to your local Blockbuster, and Blockbuster was extremely slow to react. Refusing to recognize the success of online rentals, Blockbuster continued to report quarterly loss after quarterly loss until they finally released their own style of online rentals in 2004.
The Blockbuster Online Rental Program consists of three available plans.
- 1 DVD Plan: You can have 1 DVD at a time for $8.99 per month ($11.99 gets you 5 in-store exchanges)
- 2 DVD Plan: You can have 2 DVDs at a time for $13.99 per month ($16.99 gets you 5 in-store exchanges)
- 3 DVD Plan: You can have 3 DVDs at a time for $16.99 per month ($19.99 gets you 5 in-store exchanges)
Structured similar to the Netflix free trial offer, Blockbuster offers a 2 Week Free Trial for those who are looking for a test run. You can select up to 3 DVD’s at a time and if you have a Blockbuster near you, taking advantage of their in store return option for an additional $3 a month might be right up your alley. Another perk of the Blockbuster Online Rental Program is that Blu-Ray DVD’s are available at no extra cost. Blu-Ray really hasn’t taken off just yet but still an asset for those with Blu-Ray players.
Continuing to be a loyal member of Blockbuster, I decided to give their Free Trial offer a shot a few months ago. With a Blockbuster location just a few blocks away I also decided to partake in their In-Store exchanges option. I know on the surface it would look like a waste of $3 since you have unlimited rentals but unlike with Netflix, I have the ability to make an impulse decision if I have to. A minor drawback of renting movies online is that you might be in the mood for a movie when you drag it to the top of your queue but by the time you receive the movie, eh. Exchanging a rental directly at the store allows me to watch the movie I want, when I want, even if I have a last minute change of heart. For me, certainly worth the additional $3 a month.