Netflix Faces Challenges From Blockbuster, Walmart

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NetFlixCall it opportunism, playing to weakness, or just marketing to pissed-off people: Targeting your competitor's customers after an unpopular move, one like that made by Netflix earlier this month, is kind of a no-brainer.

NPR's Marketplace Tuesday called it "anger marketing."
And Blockbuster knows from anger. Through the late 1990s until 2005, the company dealt with millions of customers angry over excess late fees and what many considered ungentlemanly collections practices. Netflix was virtually founded as a response to consumer anger over Blockbuster's late fees -- at least, it was marketed as a low-cost alternative to punishing daily fees.

So how pleased was Blockbuster, then, when Netflix launched its volley into the dead of mid-summer with a pricing change that it called "lowering rates" and Twitter screamed was a price hike, a rip-off, a sacrilege to all we hold near and dear? I only wish I could have been a fly on the wall in the office of Blockbuster's marketing executives when they realized, after all the ignomy of becoming a dinosaur, then being taken to their knees by the DVDs-by-mail upstart, they finally had a chance to turnabout. It must have been grand.Blockbuster sent emails to Netflix customers beginning last week. There are evidently several versions; one of the first said, "Bye Bye Netflix, it's your old friend, Blockbuster." Another was more direct: "Netflix Customers, Say Hello to Blockbuster." The email went on to describe Blockbuster's new package of streaming video and DVDs by mail specifically for angry Netflix customers. Its price for the one-DVD-at-a-time deal is $9.99 a month, but one month is free if you prove you're a Netflix customer. The deal is $2 a month more than Netflix's old price -- proof, it seems, that Netflix's old prices were too low for the market to bear. Ironic, hmm?

Lest it see any price war being waged without the famously chintzy retail chain chiming in, Walmart, too, is getting in on the anger. Its service is more like iTunes than Netflix, but it's a valid alternative, especially as the average price to rent a movie is cheaper than those on iTunes (Walmart's prices are $1 to $5.99 for a 24-hour rental, and $4.99 and up to buy; most of iTunes' movies are $3.99 for a 24-hour rental and $14.99 to buy).

You want more irony? Despite all the anger that's been used to pit one marketing campaign against another over the past decade, consumers are actually being slowly converted from trips to the video store on weekends and summer evenings to any-time instant gratification over the internet. No one (with the exception of those poor old saps, the Redbox renters) is paying late fees any more.

Oh, except for Blockbuster customers (Ha! Gotcha!). They're doing what Netflix wanted all along, and they're doing it for more money than they did a few years ago. Sure, you won't end up getting a collections call because of the money Blockbuster says you owe for DVDs you forgot to return. But one way or another, you're paying an easy $100 each year for movies that's above and beyond the several hundreds you're probably paying for cable and the other several hundreds you're probably paying for internet over which to stream those movies.

We'll always find someone else at whom to be angry, and, one way or another, the studios will continue to collect our money to keep the movie star machine cranking. It's as inevitable as it ever was.
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