Blockbuster grinches Total Access customers with price hike
A handful of disgruntled (and in a couple of of cases, soon-to-be-ex-) Blockbuster customers wrote in this morning to point out that the video rental giant has hiked the prices for its Total Access mail order rental plan.
Context & Ripple Effects
Blockbuster's 2007 has been a pivot year: after reports in June that it and Best Buy were preparing movie download services with studio backing, it bought Movielink in August to get a digital foothold. Through all of that, Total Access — the mail-order plan that lets subscribers exchange online rentals in stores — has been its main weapon against Netflix, and the subject of a widely-read obituary-style look at Blockbuster's trajectory just last month.
Now the company is raising prices on that same plan, with the 3-out unlimited tier moving to $34.99 according to syndicated pickup by Hacking NetFlix, which notes this is not the first increase. Squeezing the flagship retention product mid-pivot is a bet that the base will absorb it rather than defect.
First-order effects
- Total Access subscribers face a higher bill on the plan they joined at lower rates, and the customer complaints cited by Ars Technica include members who say they are cancelling outright.
- Blockbuster trades short-term revenue per subscriber against churn in the one segment where it holds a structural edge over Netflix — in-store exchange.
Second-order effects
- Every dollar of the increase narrows Total Access's price gap with Netflix's plans, handing Netflix a retention argument it did not have to earn and lowering the switching cost for Blockbuster's most valuable households.
- Store traffic takes the hit indirectly: in-store exchanges are what make the plan sticky, so cancellations erode the foot traffic that Blockbuster's retail business depends on.
Third-order effects
- If Blockbuster keeps monetizing its installed base while funding the digital build-out it began with Movielink, the pattern points to a classic subscription scale trap — pricing up a shrinking core to finance a transition whose economics are still unproven.
The trend: Physical-media subscription services are shifting from discount-driven subscriber growth to raising prices on existing customers as the digital transition forces them to fund two businesses at once.