Will Avatar Increase Blockbuster Subscriptions?

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AvatarWith $2.7 billion earned worldwide, Avatar became the highest grossing movie ever to hit the big screen.  Today, that number will certainly be added to, as Avatar was released on DVD and Blu Ray.  Anyone that wants to rent Avatar on DVD will have to visit their local Blockbuster brick and mortar store, add it to their Blockbuster queue, or watch it on Blockbuster On Demand.  Are you noticing a similarity in all of your options?

You see, Avatar was produced and released by 20th Century Fox Studios.  Fox, along with Sony and Warner Brothers, entered into an agreement with Blockbuster stating that their new DVD releases would be available the same day, only to Blockbuster.  Netflix and Redbox would have to wait four full weeks before allowing their customers to rent movies from these three studios, making Blockbuster the only legitimate source for new releases from three major movie studios.  Some would say that 28 Days Later has become a real-life horror movie for Netflix and Redbox.   So the question here is how many people, Netflix subscribers or not, will sign up with Blockbuster By Mail because they want to rent Avatar, and they want to rent it now?

A few weeks ago Blockbuster released Sherlock Holmes on DVD and Blu Ray and it continues to generate millions in rental revenue while Netflix and Redbox just sit back and relax.  On Tuesday, April 27th, Blockbuster will no longer be the one-stop shop for Sherlock Holmes, so the playing field will be evened out.  But by then, will the movie be of any real value to Netflix or Redbox?  Outside of residual rental revenue from already subscribed customers, the DVD itself poses no real opportunities to expand the Netflix or Redbox clientele.  The plot thickens.

Netflix (NFLX) released their Q1 earning report yesterday, citing tremendous growth in just the first three months of 2010.  The stock has tripled over the last 18-months, which is amazing considering the lack of growth within the stock market and from January-March, Netflix was able to add 1.2 million new subscribers, bringing their current total to around 13.5 million subscriptions.  Until the studios entered into an agreement with Blockbuster to give them exclusive rights to new DVD and Blu Ray releases, it appeared that nothing would stop Netflix in their quest to crush the opposition.

There’s no doubt that Avatar will generate a huge amount of new subscriptions for Blockbuster and they will come from two types of people.  Type #1 will be current Netflix subscribers that won’t be happy with waiting a full month for new DVD’s to come to them and decide to switch to Blockbuster By Mail.  Type #2 will be people without current subscriptions to any online movie rental company, which to Blockbuster are just as valuable.  If you think about it, the main reason anyone would sign up for online movie rentals is because they have at least one movie in mind they want to see right now.  No one signs up for Blockbuster By Mail and says “I’ll get to my queue next month”, they go right to the available list and start plucking movies out, one by one.

Even if Avatar isn’t the DVD and Blu Ray hit people are expecting it to be, primarily because the movie will now be in 2-D, that still works in Blockbusters favor!  For the first four weeks, consumers will rent the movie, watch it, talk about it and if the buzz isn’t good because of the lack of special features, Blockbuster won’t care.  According to Warner Brothers, as reported in this Motley Fool article, 75% of DVD sales of new titles occur within the first four weeks after release.  By then, Blockbuster will have already generated massive amounts of revenue from everyone that wanted to see it first and by the time Netflix and Redbox get their hands on it, the movie will be of little value.

Unless Fox, Sony and Warner Brothers stop making movies, the Blockbuster subscription list will vastly improve with every new release they offer.  Somebody like me, that currently has a Netflix subscription and doesn’t have a Blockbuster subscription, will find a movie that they weren’t able to see in theaters. Then, when that movie comes out on DVD and Blu Ray and it’s only available at Blockbuster, the switch from Netflix will have to be made.  While Avatar in 2-D is not that movie for me, it’s only a matter of time before I cancel my Netflix subscription and hop on-board the Blockbuster revival train.

If you’re the type of renter that doesn’t mind waiting a month for new DVD’s to become available, check out the Netflix 1 Month free trial offer.

Published or Updated: August 20, 2013

Comments

  1. Jeff says:

    Blockbuster is trading at $.50, but not for long!

  2. Robert says:

    BBI LONG!!!

  3. Stocki Bottoms says:

    I am a current Netflix subscriber and also just signed up for Blockbuster OnDemand. You can review my experience (very favorable) with the Blockbuster OnDemand service here:

    http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_B/threadview?m=te&bn=1958&tid=174721&mid=174721&tof=5&frt=2#174721

  4. John says:

    Get ready for the stock rebound, these are very telling signs that more is in the works for Blockbuster!

    John

  5. Owen says:

    Yea these new deals are a real game changer, I would be surprised to see Blockbuster’s stock start to rally.

  6. Mikey says:

    That 28 days makes all the difference in the world to my family! When these new releases come out, my family wants them now!! Good for Blockbuster!! We’ve never been a subsciber to any other service. We love the mail ystem in that you can drop them off at a brick & motar locaion for immediate replacement. Netflix stock = $100 per share — Blockbuster stock = .50 cents per share. Go figure!!

  7. TheDude says:

    Ugh… ticker BBI is gonna fly. No brainer at current valuation given fundamental industry landscape changes.

  8. Vincent says:

    I have been a long-time Netflix subscriber. When I saw that Netflix sought a deal with Warner Brothers to wait 28 days in exchange for expanded streaming (I hate the quality and don’t use it), lower cost of DVDs (ie lower operating cost) and still charged me the same to throw me under the bus I started to hate being treated like I wasn’t important anymore to Netflix as I kept coming upon titles that were out that I couldn’t rent.

    When they made the deal to throw us all under the bus with Avatar I put my Netflix account on hold and opened a Blockbuster account in time for them to ship me AVATAR to my door on Thursday (the day AVATAR was released.)

    My Netflix account will be on HOLD until they stop delaying the new releases. If cash-strapped Blockbuster could make a deal to give us new releases on time, Netflix certainly can. But they chose to take us for granted and I don’t let people get away with that. For now Blockbuster can have my money!

  9. Janie says:

    I will stick with Redbox and wait. I have a gift certificate for $15 for Blockbuster that I was going to use today to buy Avitar. I went there and guess what? All Blockbusters have their computers down. Can’t take credit cards, mac or gift cards. This was one of the reasons I gave up on them over a year ago. I would go in and the computers would be down so you couldn’t use your rewards card to get your free rental. Now the first time I walk in there after that last time and once again, out of operation. Their website is down too so you can’t rent a movie from there either. I like Redbox even if I have to wait. I order on line, pick up at any of the 5 local locations for one dollar plus tax and return it to any machine regardless of what location you rented it from.

  10. Rich says:

    Wow, just look at the scuzzy business practices you are all so willing to reward. Blockbuster keeps jacking up their rates and you suckers will keep going there because you can’t wait a little longer to see the film.

    Way to reward big business for what sure looks like unfair business practices. It’s designed to SCREW the consumer, not help them, And you fools are falling for it hook, line, and sinker.

    I love free enterprise capitalism, and it would work great, keep ugly practices in check, and be best for everyone if consumers were educated, disciplined, and voted with their dollars when they see something coming that is fishy and actually designed to screw them in the end.

    • Linda Lindsay says:

      You’re the only one that got it right! Blockbuster has been screwing the public for years with their outrageous prices. I quit them years ago and have no problem waiting to see a movie that I have the rest of my life to see. There are a lot of good books you antsy people could read till your new release is available from all vendors.

  11. We are very high on BBI – Blockbuster.
    We picked KERX @ .18 cents and look at it now.

    Guess what? We just picked BBI as the next BIG penny stock.

    • jean says:

      God bless blockbuster. Watch it fly!

  12. BBI will be a double very soon, just as we picked KFN @ .76 cents, knowing that Toys ‘R’ Us was owned by them (now a $12 stock) we know that Blockbuster will come up with some new ideas and come out swinging.

    BBI the next BIG thing.

  13. nobody says:

    Isn’t it illegal to have a monopoly (ala Blockbusters “Exclusive” caulkblock)? This seems like shady business.

  14. Lauren says:

    Wow, this is total bull.

  15. Well, Avatar has a unique characters so I guess that what makes it intriguing.

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