December 9, 2007 in Business

Blockbuster-Netflix battle intensifies

By The Spokesman-Review
 
Associated Press photo

Netflix customer Carleen Ho holds up DVD movies rented earlier this year, at her home in Palo Alto, Calif. Associated Press
(Full-size photo)

Competition for online rentals intensified this year as Blockbuster Online vied against incumbent Netflix.

Online rentals composed about 16 percent of the 2006 rental market, according to Entertainment Merchants Association.

Business continues to grow for Netflix, which charges members a fee to order movies online and receive them through the mail. Its Spokane distribution center, which opened in February 2005, averages about 11,000 discs a day, said spokesman Steve Swasey.

Netflix boasts it has more than 7 million members. Swasey attributed the growth to Netflix’s catalogue — about 90,000 titles – convenience and customer service.

“Netflix has made an industry around a better user experience,” he said.

Blockbuster claimed its online program, which allows subscribers to return some movies in-store, had more than three million subscribers by May.

A group of North Idaho entrepreneurs hopes to challenge Netflix by starting a similar service for the Panhandle.

Dan Holmes, owner of Movies & More in Athol, Idaho, said he and two business partners hope to launch North Idaho Flix by next spring, competing by offering cheaper prices, faster service and a personal touch.

North Idahoans prefer to spend money locally and would support the venture, Holmes contended.

On-demand

While many experts foresee streaming, on-demand video as a dominant future rental method, widespread adoption may not be right around the corner. On-demand rentals still face technological, legal and consumer hurdles.

“I think it’s got to be something very simple that you can do on the couch, and it’s not there yet,” said Carrie Dieterich of the Entertainment Merchants Association.

Consumers spent about $6.2 million on online rentals in 2006, compared with $3.5 million for online subscription services and $19 million for downloading-to-own, according to the association.

Netflix in March gave all members access to on-demand movies. By August, the service, which currently offers about 5,000 titles, had 10 million views, Swasey said.

Blockbuster and Movie Gallery also reportedly are pursuing on-demand content.

Other renters turn to pay-per-view movies through cable or satellite companies, which typically come out after movies on DVD.


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