A year ago, Blockbuster Video was in the middle of a concerted effort to draw customers to Total Access, its online rental service. Netflix had grown to number two in video rental market share, leaping past Movie Gallery and Hollywood Video--combined. To stave off Netflix's further incursion into the rental market, Blockbuster handed down a commandment. You will enroll customers in Total Access in your stores. At my store, we were expected to sign up twenty to forty customers a week.
To encourage customers to enroll with Total Access, Blockbuster created a phenomenal offer that differentiated it from Netflix. Total Access customers were allowed to exchange their online rentals for free rentals in Blockbuster's stores. It was part of the Total Access "Rent Online, Exchange in Store" program, and it worked like gangbusters. After half a year of effort, Total Access had increased its subscriber base
by roughly one-third, and Netflix saw its first decline in customer base in years. Customers were happy, and the rank and file employees were happy. Its rare that we have a program to sell that essentially sells itself and has the benefit of tremendous word of mouth. Then the bill came due.
Blockbuster had spent about thirty five million dollars advertising Total Access and the program had also cost Blockbuster roughly the same in "lost" rental revenue (which isn't to say that those rentals would have occurred without the Total Access exchanges). That coupled with the succession of CEO John Antioco by Jim Keyes
led to Blockbuster's focus shift from Total Access to brick-and-mortar sales. As the laptops moved into the background, ancillary merchandise moved into the foreground. If you've been inside a Blockbuster lately, you can not help but to have noticed the increase in movie licensed board games, toys, and books. To make matters worse, Blockbuster bungled Total Access further by changing the Total Access program prices and benefits and failing to effectively notify the customers of the changes. Customers lost the monthly free rental they received simply for being members, and they also lost their unlimited exchanges unless they subscribed to a more expensive plan. As for rank and file morale, there is nothing that brightens one's day more than explaining to customers that they are going to be getting less for their money. The communication from Blockbuster on this effort was so poor that we are still explaining these changes that happened months ago.
Days ago, though, Blockbuster began notifying customers of new price changes for Total Access. Program prices are increasing
by two to ten dollars a month beginning December 27. The first change to the pricing structure didn't increase all the customers prices, it just reduced the value they were receiving. This new change seems to be the first move's complement. Now, customers will be receiving less value at a higher price compared to a year ago. Blockbuster's communication has been a little better. Customers seem to be aware--and upset--of the changes. The employees received notice of the changes about a week ahead of time. This just does not bode well for the program I resisted and finally accepted a year ago. It's just been an amazing ride. Summer 2006, the Total Access (then called Blockbuster Online) website was a miserable mess and customer interest was low. By February 2007, the website had been updated, and customers were actually inquiring about the program. October 2007, customer dissatisfaction seemed to be growing, an echo of Blockbuster's corporate dissatisfaction. And here we are. Blockbuster is ending this year with Total Access being one of those memories to be reminisced over champagne on New Year's Eve.
I began working in video stores in 2000. Back then, Hollywood Video's (my former employer) stock was rattling around in the basement, near one dollar a share. All the trade publications were heralding the end of the brick and mortar video business, seeing a future in digital distribution. At the same time, Netflix was just starting up. I had one friend who used Netflix then, and no one else had even heard of it. Digital distribution, while it exists in many different forms, has never really caught on. I can't help but think that it eventually will. Anyone who uses cable's OnDemand services knows that the ease of use is high and the offerings plentiful. On the other hand, Netflix's success and Hollywood's demise shows that the internet as the medium for movie rental is the present. Yes, Blockbuster Video is hobbled by its ownership of thousands of rental stores, but it is mortgaging its future by investing in its past. Blockbuster must figure out a way to support Total Access and leverage emerging technologies because its name is synonymous with movie rental and it could--and should--use that name to glide into the future of this business.
Tags: Blockbuster, Total Access, Netflix