Blockbuster Service to Compete with Netflix

Blockbuster launched its own set-top box and on demand service today. The cost is $99, but includes 25 movie downloads and the additional movies cost $3.99. This move seems to be in direct response to Netflix‘s series of announcements from the Roku set-top box to the Netflix XBOX 360 service. This looks like two rivaling business models as much as marketing jujitsu.

The Blockbuster offering does not require any recurring fee or subscription like with Netflix. But Blockbuster seems to be really fragmented on their marketing strategy. First, they have a large investment in brick-n-mortar locations that they need to determine if its an advantage or disadvantage. Second, they need to simplify their distribution options. Right now they have distribution in-store, though mail, set-top box, and PC (through MovieLink) all of which don’t have an intergrated experience.

In an article in the New York Times, Blockbuster CEO Jim Keyes seems to be really out of touch.

Mr. Keyes says, is offering customers many ways to rent and buy movies: vending machines, subscriptions by mail and digital downloads. But more than 90 percent of the movies it distributes are still through stores. Over the next five years, he said, DVDs and Blu-ray discs rented in stores will continue to be the bulk of Blockbuster’s business. Mr. Keyes added that the growing interest in high-definition video, which can take five or six times as long to download as standard video, will make Internet movies even less attractive. “You can drive to our local store and rent a Blu-ray disc in less time than it will take you to download a movie in high-def,” he said.

This seems to be coming from a guy who is really out of touch with long-term technology trends. As broadband speeds increase over the next few years and fiber becomes more common place a HD movie will be downloaded in a matter of seconds. The consumer will want access to their content anytime and anywhere, and wont bother to drive to the local Blockbuster to get it.