Blockbuster to rewrite video rental script after Netflix settlement
Blockbuster Inc. says it has reached a settlement in a lawsuit Netflix Inc. filed in April 2006 charging Blockbuster with infringing on patents related to online video rental services. Blockbuster reported the settlement in a filing with the U.S. Securities and Exchange Commission and said terms of the settlement would not be released.
Blockbuster also said in the filing it plans to modify its Total Access service that allows consumers to order videos online. One analyst predicts Blockbuster will raise its prices, giving Netflix an edge in the bitter competition between the two companies.
Blockbuster said in the SEC filing it planned to continue to promote the Total Access service “but before year-end plans to make modifications to the offering that it believes will strike the appropriate balance between continued subscriber growth and enhanced profitability.”
That Blockbuster filing “sets the stage for a price increase for Total Access by year-end, which is a net positive for subscriber growth at Netflix longer term,” securities analyst Youssef H. Squali of Jefferies & Company Inc. wrote in a note to investors. A Blockbuster spokesman responded that “pricing structure is a consideration but that the modifications don’t just focus on price.” He would not elaborate.
Netflix, No. 18 in the Internet Retailer Top 500 Guide, reported at the end of the first quarter having 6.8 million subscribers to its service that lets consumers choose movies online and receive them in the mail. Consumers mail movies back to Netflix. Blockbuster, No. 51 in the Internet Retailer Top 500 Guide, says there are more than 3 million subscribers to Total Access, which allows subscribers to return movies to Blockbuster stores as well as by mail.
In its April 2006 lawsuit, Netflix complained that Blockbuster infringed on two patents. One covered the Netflix business method of allowing subscribers to select movies from the company’s web site and maintaining a list of titles for Netflix to ship. The second covered the Netflix policy of allowing subscribers to keep movies for as long as they like without incurring late fees.
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