Blockbuster Online

In August 2004, Blockbuster introduced an online DVD rental service in the U.S. to compete with the established market leader, NetFlix. The initial price of the standard three-disc plan was $19.95, which was below the NetFlix price (which had increased from $19.95 to $21.99 in June).
In October, NetFlix reduced its own 3-disc price to $17.99; Blockbuster responded by reducing its price to $17.49. Blockbuster made a further reduction to $14.99 in December, and apparently guaranteed this price to existing customers until January 2006. In August 2005, Blockbuster raised their prices for new customers to match the NetFlix level of USD$17.99. The above prices are for the standard three-disc plan; other plans vary from $5.99 for one disc (limit 2 per month), $7.99 for one disc (limit 3 per month),$9.99 for one disc (unlimited), and $14.99 for 2 discs (unlimited).
Blockbuster currently offers bonus coupons to all of its online customers. These coupons are used in-store. Customers on any plan receive one coupon per month to rent a free DVD or game from a brick-and-mortar location. Customers who signed up for the three-disc plan prior to the introduction of Total Access received four coupons per month (one per week) which could be used for movie rentals in store. An option no longer available to new customers is the three disc plan that offered only two coupons per month. These could be used for either movie or video game rentals. Older members of the three disc plan had the option to continue this plan, or switch to the newer four coupon plan. With the new option to exchange the online mailers for free in-store rentals, the coupons no longer became necessary. However, older members still receive two coupons per month good for either game or movie rentals for the same price that members with one coupon pay. Online customer service will not allow older members to revert to this plan after responding to Blockbuster advertising intended to drive them to a new plan. When a customer contacts the online customer service to report a problem that caused a delay, the response usually includes an additional in-store bonus coupon, which is good for 30 days.
Blockbuster also offers a special promotional discount to new customers or customers who canceled their online program before the introduction of Total Access. The first two weeks of online service are free for a three-disc plan. There is also an elusive promotional discount for the first month of online service for free for a three-disc plan that is available on several online coupon websites. After the promotional period, customers have the option to retain, cancel, or modify their subscription packages.
Blockbuster's U.S. online operation started with around 10 warehouses; further expansions every year have brought that number to 36 (5 more to open in late 2007), plus 1400+ stores in the Blockbuster Online network. Most Blockbuster independent franchises do not honor the Total Access program. The company had 1.5 million subscribers at the end of the third quarter of 2006 (as compared to 5.6 million for NetFlix).[7] Blockbuster's move to follow the business pattern with its online rentals as was established by NetFlix prompted NetFlix to sue Blockbuster for infringement of patent. Blockbuster counter sued NetFlix with a counterclaim alleging deceptive practices with its patent which it alleges was designed to maintain an illegal monopoly.