Blockbuster (BBI) Surrenders to Netflix, Jacks Prices

Blockbuster CEO Jim Keyes was serious about making Blockbuster’s mail order business profitable–or letting Netflix kill it off. Last month he told investors he’d rather focus on the 20 million people who visit a Blockbuster store than the 3.1 million members of Blockbuster Total Access.

He also said he’d raise prices. Give him credit for follow-through: Yesterday he said he’d jack up prices for new mail order customers and some existing ones by 40%. The increases of $2 to $10 will take effect next week.

Predictably, NFLX shares surged 9.5% in Thursday trading. But we’re not sure why — BBI had already said it was going to retreat from the mail-order business, because it can’t figure out how to make money there. Last quarter the company dropped — or lost — 500,000 mail-order customers.

We’re also not sure how far apart NFLX and BBI are re: long-term strategy, either. One day, both of their models will look quaint, because consumers will be downloading or streaming their flicks. But it’s not clear if either one of them will have a leg up at that point — no reason that Apple, or Comcast, or a host of other players won’t dominate that business.

Earlier: It’s Official: Netflix Destroys Blockbuster
Blockbuster Q3: Underperforming Low Expectations

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