Portals to Promote Blockbuster's DVD-by-Mail Play

Blockbuster has tapped America Online and Microsoft’s MSN to promote the new online DVD rental service, a competitor to Netflix, announced Wednesday.

The two portals will at first promote Blockbuster’s new movie-by-mail offering through a combination of banners and promotional text links. In the future, however, Blockbuster Online subscribers will be able to manage their accounts through AOL and MSN.

AOL will integrate the offering with its entertainment properties, including Moviefone.

“What we’re doing now is broad reach advertising to get the word out about Blockbuster and AOL’s relationship,” said John van Suchtelen, director of e-commerce for AOL entertainment. “With our entertainment properties, we’re integrating the promotion into the pages. The hub of it will be within AOL movies, but we’ll distribute it in places throughout AOL that make sense. In Television for TV DVDs, for example, or in Music for concert DVDs.”

Letting customers manage their movie queues through Blockbuster’s portal partners is the first step in an overall strategy to enable multiple Web locations for the new online service, the movie rental company said.

MSN declined to comment on the Blockbuster relationship, but hinted it was part something bigger afoot at MSN Entertainment.

The new service from Blockbuster is very similar to that offered by Netflix and rivals like Wal-Mart and GreenCine. For a monthly fee of $19.95, subscribers get unlimited rentals and can receive up to three movies at a time. To create an incentive for sign-ups, Blockbuster is offering two free in-store movie rentals a month to new subscribers.

“We think now is the opportune time for Blockbuster to enter the online rental business, and we plan to quickly establish ourselves in this arena by aggressively marketing, pricing and combining our online program and in-store capabilities,” said Shane Evangelist, VP and general manager of Blockbuster Online.

Promotional material on Blockbuster’s home page displays the Field of Dreams video with the tagline, “If you click it, it will come.”

Blockbuster’s move toward online rental is part of a strategy to offset its plummeting in-store rental business. In its second-quarter earnings report, the company said declining rental demand had resulted in a 23.5 percent dip in profits. Netflix also disappointed, reporting substantial subscriber growth but a lower-than-hoped-for profit. The company’s stock fell precipitously.

The interactive ad market, ironically, actually appears to be one cause of Netflix’s woes. The DVD-by-mail pioneer reported it expects its customer acquisition costs to rise in 2004’s third quarter, at least in part because of price increases it has observed in online advertising. Netflix said that trend has caused it to back off its interactive marketing spend in favor of a bigger TV buy.