Blockbuster Vows To Go After Netflix

Blockbuster Inc. chairman/CEO John Antioco promised shareholders yesterday (July 20) that the video-rental giant will take the fight to online rental rival Netflix Inc. when it launches its own Intern

Blockbuster Inc. chairman/CEO John Antioco promised shareholders yesterday (July 20) that the video-rental giant will take the fight to online rental rival Netflix Inc. when it launches its own Internet-based rental service this year.

While Blockbuster executives have in the past often shrugged off the competitive threat from Netflix and the significance of the online rental market in general, Antioco openly acknowledged its strategic importance at his company's annual shareholder meeting in New York.

"Two million (customers) have spoken," he said, referring to Netflix's subscriber base. "We can't continue to allow our customers to erode away from us. We are not going to ignore these folks."

Antioco said current online renters tend to be affluent and technology-savvy, just like many of Blockbuster's customers, meaning that his company has likely been losing a sizable share of consumers to Netflix. Assuming that about 30% of Netflix users may have been Blockbuster customers, Antioco said fighting for online renters is "a significant opportunity" for his firm.

The CEO gave few further specifics on Blockbuster's online rental site, for which the company has been running a beta test with a monthly subscription price undercutting Netflix.

Antioco didn't say when the site will go live but hinted it will be sooner rather than later. "We will be launching when we're ready to launch," he said. "I'm comfortable that it will be long before" the previous guidance time frame, which had called for a launch by the fourth quarter.

While subscriber acquisition costs will be high over the first year, the online rental service will bring "significant profit beyond that," Antioco predicted, adding he expects Blockbuster's profit per subscriber to be above Netflix's.
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