Blockbuster testing online DVD rentals for Q4 launch

Blockbuster is testing a long-anticipated online DVD-rental service with a multi-channel twist: In addition to receiving mailed DVDs rented online at a starting price of $19.95 per month, subscribers also get e-coupons good for two in-store rentals at no extra charge. So instead of always waiting for the next mailed DVD, subscribers will be inclined to visit their local Blockbuster store where they may also purchase some candy or popcorn if not even rent an extra DVD or electronic game, Jerianne Thomas, director of marketing, tells InternetRetailer.com. “The e-coupons are a way we can differentiate from Netflix,” she says.

Blockbuster is also undercutting the retail pricing of Netflix, the recognized leader and pioneer of online DVD rentals and No. 30 in the Internet Retailer Top 300 Guide to online retailers. Blockbuster’s basic offering is an unlimited number of rentals per month, with up to three DVDs out at any one time, for a monthly fee of $19.95. Netflix recently raised its price for the same service by $2, to $21.95.

The price spread between the two companies widens with more expensive service plans. Blockbuster is charging $29.99 and $39.99 per month, respectively, for plans that allow up to five DVDs or up to eight DVDs out at the same time. Netflix charges $33.99 and $49.99 for the same service levels.

The Blockbuster service, which is expected to officially launch in the fourth quarter, became available last week at Beta.Blockbuster.com. “The early response has been good,” Thomas says, noting that she was unable to say how many people were using it.

Blockbuster’s service is not offering the lowest price on the market, however. Wal-Mart Stores Inc.’s WalMart.com undercuts Blockbuster’s basic service price by more than $1, offering an unlimited number of DVD rentals per month with up to three out at the same time for $18.76.

Blockbuster hasn’t determined yet exactly how it will fulfill its online orders. But Thomas says it will consider fulfilling at least some orders out of its more than 6,000 retail stores in the U.S.