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Blockbuster begins tiny steps towards a new life under Dish

The first tiny steps in changing the offers which Blockbuster has have emerged from its new owner Dish Network, with what most sources are describing

By PETER WHITE

Published: 2 June, 2011

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The first tiny steps in changing the offers which Blockbuster has have emerged from its new owner Dish Network, with what most sources are describing as taking a leaf out of the Redbox book, and lowering the in-store rental price of thousands of movies to only 99 cents a day.

But the truth is that Blockbuster is not trying to turn itself into another low margin in-store kiosk business, instead it is trying to offer a deal close enough to the Redbox deal, which only appears to be a little more expensive, while keeping it early access to DVD rentals. Redbox has a delay of 28 days, as does Netflix, on key DVD releases, because they are offered so cheaply. What Blockbuster is trying to do here is get a 28 day period of exclusivity in rental, but appear to be as cheap as Redbox.

So the new Blockbuster deal charges $2.99 for the first day of rental on newly released movies, and additional rental days are only 99 cents a day. In effect it is still operating continued payment stacking up at $1 a day. For movies not in this 28 day window it will charge $1.99 for the first day and $0.99 thereafter and a number of older classics, Blockbuster says thousands, are now going for $0.99 a day. Up until now Blockbuster was charging $4.99 for a three-day rental, and if you keep a DVD for three days, that will still be the price for a recently released movie. As a one month promotion Blockbuster will also launch an unlimited free in-store movie rental promotion through to July 4.

"Our customers are seeking a better value – we've answered with new pricing and the flexibility of single day rentals," said Michael Kelly, president of Blockbuster. "Our new pricing gives our customers the best of both worlds: access to the latest releases – many 28 days before Netflix and Redbox – and the most movies at low prices."

The other part of the promotion is that when a customer rents a Blockbuster movie at $2.99, they can have one of the lower priced ones for free (for the first day). If people watch the DVD that day they can go back to the store and get another free one same day.

This doesn’t affect the core areas where Blockbuster competes with Netflix, and that is with online DVD rental, where movies are rented with no late fines, booked over the internet and posted; or online movie rentals. Just how Blockbuster addresses these two lines of business will really dictate its future, but for now it is positioning a chunk of business against Redbox.

The struggling DVD rental business was bought at a knockdown $320 million in April by the Dish Network and Kelly was placed in charge immediately and took charge as CEO of Dish just a few days ago.

So far only a handful of the 1,700 stores that Dish acquired in the deal have been closed and an evaluation of them is still ongoing. Dish Chairman Charlie Ergen has always said that he wants to negotiate a direct studio presence in each of his stores, and so depending on whether they are attracted to that, the existing 1,700 stories might stay open or as few as the 370 that are profitable may make it. It looks like Kelly will play a game of bluff with the studios about how much revenue they want to lose in shutting those stores in order to get better terms than Netflix or Redbox, and this new pricing is the first step.

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