The long-running saga over DVDs-by-mail services in the United States has taken another twist, with regulators rejecting a new service proposed by the US Postal Service.
Read MoreVideo game rental company GameFly has won a two-year regulatory battle against the US Postal Service regarding “discriminatory” mailing fees compared to rivals Netflix and Blockbuster.
Read MoreNetflix Inc. is well on its way to transitioning from a DVD rental company into an organization that will deliver subscribers Internet-based entertainment content to a variety of web-enabled devices, CEO Reed Hastings told analysts on the company’s first quarter earnings call.
Netflix, No. 18 in the Internet Retailer Top 500 Guide, announced in January a relationship with LG Electronics to develop a new device that consumers can hook up to their high-definition TVs, enabling them to use the Internet to purchase and download movies. Netflix is pursuing deals with four other unidentified consumer electronics companies, which Netflix expects to have signed and in place by the end of the year, Hastings told analysts.
With web-enabled TVs and mobile devices, subscribers can watch movies streamed from Netflix.com just as they can do now on their personal computers, says Netflix. The company has 90,000 DVD titles in its library and more than 6,000 movies and TV episodes that members can purchase and download to their computers.
Despite the deals with additional manufacturers, Netflix is cautious and will not move away too quickly from its current DVD and entertainment content business model. “Nothing about these agreements will be material to our financial results for the foreseeable future,” Hastings told analysts. “We’ll take it year by year and model by model as we and our consumer electronics partners come to understand the opportunity better.”
Netflix reported net income of USD 13.4 million on revenue of USD 326.2 million in the first quarter compared with net income of USD 9.9 million on revenue of USD 305.3 million in the prior year.
Read MoreBlockbuster Inc. has begun testing movie rental kiosks at Papa John’s pizza outlets and Family Dollar stores. Movies at the kiosks will be available for USD 1, substantially less than the cost for rentals at regular Blockbuster stores.
The Blockbuster Express kiosks, which are about the size of a vending machine and hold 250 movies, are in three Papa John’s International Inc. locations and seven Family Dollar Stores Inc. outlets in the Lexington, Ky., area, said Karen Raskopf, a spokeswoman for Blockbuster.
The kiosks may help Blockbuster fend off DVDPlay Inc. and Redbox Automated Retail, jointly owned by McDonald’s Corp. and Coinstar Inc. The two companies have lured customers from Blockbuster and Movie Gallery Inc. movie rental stores by offering USD 1 DVD rentals at supermarkets, drugstores and McDonald’s restaurants.
“It’s a natural affinity,” Papa John’s Chief Executive Nigel Travis said. “You are seeing a consolidation of food and entertainment. It definitely drives traffic.”
Recently released DVDs typically rent for USD 4 for five days at a Blockbuster store. The USD 1 DVD rentals can be returned to any Blockbuster Express kiosk, not just the location where the movie was rented, Raskopf said.
Blockbuster also is testing kiosks in fast-food restaurants and other unspecified stores around the U.S., Raskopf said. Papa John’s, which will have three kiosks in rural towns in another state, said customers would be able to rent the movies when they pick up carryout orders. They can’t get the USD 1 rental when ordering pizza that will be delivered.
Shares of Dallas-based Blockbuster fell 11 cents Wednesday to USD 3.76.
Blockbuster is considering kiosks and vending machines where customers can rent movies or burn copies directly to a DVD, Chief Executive James Keyes has said.
“We think vending is probably the fastest-growing segment right now,” Keyes said in an interview this month. “The next bigger trend is for vending, and we are well positioned to be able to play through an electronic kiosk.”
Papa John’s, based in Louisville, Ky., has linked pizza with DVDs before, with promotions in the last two years with films such as “Spider-Man 3.” The chain wants to see if the kiosks help increase the number of customers, Travis said.
Blockbuster is seeking to boost in-store sales as the number of ways consumers can obtain movies has increased. Customers can rent DVDs online at Netflix Inc. and have them delivered by mail, download TV shows at Amazon.com Inc. or watch video-on-demand through their cable provider.
Read MoreThe U.S. Postal Service and the Postal Regulatory Commission are hosting a summit on March 13 called “Meeting Customer Needs in a Changing Regulatory Environment.”
The free summit, which is open to the public, will take place from 9 a.m. to 5 p.m. at the Bolger Center in Potomac, MD. It will discuss how the recently implemented Postal Accountability and Enhancement Act could increase the USPS’s ability to meet customer needs.
Conference organizers said “by focusing on the issues important to customers, the conference will continue the dialogue recently initiated by the Postal Regulatory Commission in its rulemaking process.”
Panels include “ Meeting Customers Needs in the Market Dominant Category”; “Meeting Customer Needs in the Competitive Product Category”; “ Designing Flexible, Customer-Responsive, Pricing and Product Regulation”; and “ Service Standards and Measurement for Market Dominant Products.”
Speakers include Dan G. Blair, chairman, Postal Regulatory Commission; John E. Potter Postmaster General/CEO, USPS; Markus Wilhelm, CEO, Bookspan; Lou Milani, senior director of business affairs and publishing operations for the Consumers Union of U.S. Inc.; Mike Martinez, vice president of logistics for the Home Shopping Network; Bill McComb, director of operations support for Netflix; and Dan Emens, vice president of marketing operations for Chase.
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