Movie Rental Price War Works as Incentive for Customers

Newcomer to the mail-order DVD business, Blockbuster is taking on rival Netflix, Inc., undercutting the price on renting DVDs online to try to lure customers into its corner.

After Blockbuster began its online DVD rental subscription business several months ago, charging $19.99 for a monthly subscription, Netflix kicked off the price war by announcing that it would cuts its monthly subscriptions for DVD rentals to $17.99 from $21.99 beginning Nov. 1. Blockbuster was quick to counter, announcing that it would drop its price to $17.49 for customers who keep up to three DVDs out at a time, a standard policy at Netflix called 3-at-a-time.

Blockbuster said it plans to “significantly increase awareness” of its service, including adding new customer incentives.

For example, the two free in-store rental coupons Blockbuster Online subscribers get each month will now be good for game rentals as well as movies. And online customers will start receiving coupons good for other in-store Blockbuster products and programs including discounts on new, used and traded retail movies and games.

“With this lower online price point and new consumer incentives, we intend to drive customer awareness and new subscriptions for our online service, said John Antioco, Blockbuster chairman and CEO, in a statement.

Netflix is considered a pioneer in the online mail-order DVD subscription business since its founding in 1998. It has more than 2 million customers. Both Netflix and Blockbuster claim more than 25,000 DVD titles in their libraries.

Blockbuster declined to report on the number of subscribers it has signed so far but said that it has signed up more than Netflix did in its first year and a half of business.

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