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Blockbuster moves to undercut rival

Blockbuster Inc planned to launch an Internet-based DVD rental service across the US yesterday, a move aimed squarely at competitors like Netflix Inc, that have cut into the video giant's store-based business.

The subscription plan will let customers keep up to three movies at a time for US$19.99 per month -- undercutting Netflix by US$2. It will offer five DVDs at a time for US$29.99 a month or eight for US$39.99. The offers will come without late fees, which are a sore spot with many customers. Blockbuster will throw in coupons for free rentals in the stores.

Taking a page from the Netflix book, Blockbuster will pick up shipping charges if customers return the DVDs in specially designed envelopes.

Blockbuster dominates the movie-rental business but has seen its fortunes hurt by the challenge of subscription services such as Netflix and by cheap DVDs for sale at retailers like Wal-Mart Stores and Costco Wholesale Corp.

In the first six months of this year, sales at Blockbuster stores open at least a year fell 5.1 percent, and company officials warned last month that the rental business will keep sliding into next year.

President and chief operating officer Nigel Travis said the online subscription business will bring in new customers -- the company claims that 65 percent of the US population lives within 10 minutes of a Blockbuster, but many rural areas don't have one -- and lead current customers to spend more.

"The mixture of new customers and getting more out of existing customers ... we see ourselves picking up a greater share of the entertainment wallet," Travis said.
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