Netflix and GameFly Beware: Blockbuster Adds Games to By-Mail Service

GameFly Blockbuster Netflix

In the world of subscription-based services, Netflix and GameFly (the Netflix of video games) reign king. But for how much longer?

Announced today, Blockbuster is adding games to its by-mail subscription service for no additional cost. Customers now have access to more than 3,000 titles on the Xbox, Xbox 360, PS2/PS3, and Nintendo Wii, in addition to the store's movie and television offerings. Games will be treated like any other movie or TV show DVD placed in your queue—there is no limit on the number of games that can be rented per month.

This news comes as a blow to GameFly, which has built its business on by-mail game subscriptions and is planning for its IPO. While the service offers some 7,000 titles, it costs $15.95 monthly for one disc, and $22.95 for two discs. Blockbuster's plans begin at just $8.99 for one disc, $13.99 for two, and $16.99 for three. How will this impact GameFly's business? What will the service do to protect its market share?

"I've known about this for about two minutes, but I can't think of one thing we'd do differently," GameFly's CEO David Hodess tells Fast Company. "The honest truth is that ever since we started the company, we've built it as if we had a major competitor. Until Blockbuster can do a better job with games than GameFly, everybody should subscribe to our service." Hodess could not comment on how this would affect the company financially or its upcoming IPO.

For Netflix, which is much more mainstream and established, this announcement shouldn't be as worrisome, but it does serve as yet another example of Blockbuster consistently gaining strategic advantages. Just a few months ago, the movie-rental giant inked a 28-day exclusive window with movie studios, which gave the company a four-week leg-up over Netflix for when its customers gain access to new releases. Blockbuster also offers in-store exchanges and free Blu-ray upgrades, all for the same price points as Netflix. While these features have yet to gain traction among consumers, will the addition of games to its service help bite back market share? Alternatively, when I last spoke to Blockbuster CEO Jim Keyes, we discussed whether the company was attempting to do too much in too little time. Is this just another example of Blockbuster spreading itself too thin?

"Are we doing too much? What I'm more surprised by is how little some of our competitors actually get away with doing," says Kevin Lewis, head of digital strategy at Blockbuster. "Netflix told their consumers: Sorry, we didn't ask you, but we're actually not going to let you rent movies from two-thirds of the studios for a month. Hope you don't mind. So I'm more surprised how little some of our competitors actually believe it's okay to do for their consumers."

Will movies and games be enough to sway Netflix subscribers from its popular online-streaming service? Will Blockbuster's much-less expensive model cut into GameFly's market share? According to Hodess, it all depends on whether Blockbuster can deliver on what it has promised.

"As in most business, I think it's really, really easy to make an announcement," the GameFly chief explains. "It's really hard to follow through day after day after day."

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12 Comments

  • Jennifer

    Okay so let me first say I have subs to both Netflix (1 disc rental w/ unlimited streaming was 9.99 it is now 15.98)  and gamefly (2 disc rental for 22.95) this makes my total renting costs 38.93 a month. And seeing that blockbuster having the two things I rent the most together only at the amount of 19.99 is a pretty good deal to me.

    BTW did blockbuster change there 3 disc plan from 16.99 to 19.99?
    https://www.blockbuster.com/si...

    I like streaming but netflix is not the gurus of it imo. A lot of the best movies are not even done and I find there streaming service really being crappy. And I ask this to Netflix subbers. Are you not reciving this email?
    http://blog.netflix.com/2011/0...

    To sum it up you'll be charged for streaming on its own without the option of getting cds in mail the cds will be made into a different branch called Qwikster. Netflix is also breaking into the gaming field as well but at what cost honestly? You will now have to pay separate payments for streaming, cd rentals and even games.

    Gamefly is also making efforts to improve there rental programs with the download manager.
    http://www.gamefly.com/downloa...

    But I really don't see how this would work. I imagine it be like steam or Microsoft downloaders but wouldn't you still have to pay for each copy of the game? I really just don't know about this subject. But I wish they work more on the problem of there slow return rate of there games. Or get more copies of the games that are being used the most.

    So far Blockbuster is looking the best to me and I have a few questions myself.
    Q: WIll blockbuster be doing as much anime as Netflix does?
    Q: will BB have a option to send movies/game together at certain times? (Say I rent a series and it is 3 discs long but it gets broken up into shipments by games?

    Thanks

  • alyson

    First off, I love Netflix streaming, it is my family's primary source for digital entertainment although I do wish they would offer more popular kid oriented t.v. shows in their instant queue. However this holiday season I am looking for a video game rental service as a gift and the more research I do, the more I see that Blockbuster is offering the best deal around based on cost and convenience. I have been "burned" by Blockbuster's wildly changing policies but I have also seen Netflix and Gamefly change their policies too. I can only base my consumerism on what is available today and Blockbuster is the winner right now.

  • Bob Graw III

    First, did Blockbuster pay for this article?

    Also, the statement "Blockbuster also offers in-store exchanges and free Blu-ray upgrades, all for the same price points as Netflix" is a little misleading. Once upon a time, the in-store exchanges were a fantastic deal and the reason I used Blockbuster instead of Netflix. As soon as you turned a mailed movie into a store, you could take a store movie with you, and they would mail you the next movie in your queue. So, you could have six (6) movies at home at a time. But, they changed the policy and the movies in your queue are stuck until you return the movies to the store. And, then they closed all the stores near me.

    At least in my area, I can accurately predict when a movie from Netflix will show up in my mailbox. Blockbuster was usually an extra day if not more.

    And, if Netflix wanted to be in the game delivery business, they would have done it a long time ago. It's not their core business. The real question is whether or not Blockbuster will get any new subscribers because they are offering games. My guess is that some of their current subscribers will take advantage of the service, but it's not going to significantly change their new subscriber numbers.

  • acarr

    Bob, thanks for the comment.

    First off, no, Blockbuster did not pay for this article. I urge you to read up on my past articles and interviews with both Blockbuster and Netflix, and then decide whether my reporting is fair. It's actually pretty funny that you'd say that--I'll bet you're the first person ever to accuse me of being on Jim Keyes' payroll.

    http://www.fastcompany.com/164...
    http://www.fastcompany.com/165...
    http://vox.fastcompany.com/166...
    http://www.fastcompany.com/165...

    Throughout my coverage of the Netflix vs. Blockbuster war, what I've noticed most is how passionate and emotional the responses are to such a seemingly innocuous issue as where you rent your movies from. I've found that many out there are loyal to Netflix and perhaps overly harsh to Blockbuster. After all, wouldn't it be nice if Netflix added videos games to its service for no additional charge?

    Maybe it'll work for Blockbuster, or maybe it's just too much too late (something I touched on in this piece and many before it). As the two slug it out though, isn't it nice that we, the consumers, get to benefit?

  • BooMan

    The new Blockbuster Total Access is a better priced service adding more value than a combined Netflix and GameFly by mail account would as they are today.

    Bash Blockbuster all you want, yes they did make mistakes, yes they did take awhile to start turning the ship but the fact of the matter is it is happening and they are providing a better value for the consumers money.

    All you people who are affected over late fees years ago which more than likely was your own fault anyways should grow up and get over it.

  • rivercityfletch2009

    The fact that Blockbuster is doing something, although it is late in the game, is significant. Having checked out Netflix twice I am constantly disappointed at the misinformation that comes out regarding their "great" streaming program. Just look up a popular actor in the search and see how many of their movies you can actually watch without paying extra. The included titles for "free streaming" is pathetic.

  • Scott Byorum

    I quit my Blockbuster account and joined Netflix back when there was still a Blockbuster store nearby. Until reading this article, I actually thought they'd gone out of business. It's great they are trying to stay relative and competitive, but they burned me long ago on their return policies and declining customer service. I'm not going back. Surprised you're doing such a bang up article on a bloated Johny-come-lately.

  • PJ Conley

    Couldn't agree with Jensen more:

    The fact that Fast Company is lauding another of Blockbuster's late to the game strategies, when the key players are already moving on to important digital delivery tactics (like streaming) makes Fast Co. look dated and clueless too.

    Good thing I know better.

  • Jensen_G

    "yet another example of Blockbuster gaining strategic advantages". . . not sure what advantages these are. I see Netflix as having the advantage of streaming thousands of titles for no extra fee, and I get the added bonus of not supporting a company like Blockbuster that chooses to devote entire walls to individual Hollywood movies instead of offering decent movies from smaller studios.

  • shaddix

    Except netflix's streaming quality looks like CRAP. Until we have internet connections that can stream full quality blu-ray, service by mail is superior.
    Ok so maybe if you have a 25" TV and sit 10' away the streaming service looks ok. But for real movie buffs, there is no difference between netflix and blockbuster on the movie front, except that BB is cheaper :).

  • acarr

    Hey Jensen, appreciate the response, and I totally agree: Netflix's streaming service is a great advantage--I don't think anyone would dispute that. The company also has an amazing search engine, great digital partnerships with Starz and Epix, and a rich library of content.

    But Blockbuster has built up a few advantages of its own: a four-week advance on new releases, free video games, in-store exchanges, etc. Those are the strategic advantages I was referring to. I can absolutely understand where your frustrations for Blockbuster come from--many other consumers, however, are just looking for the best deal.

    It's too early for Blockbuster (or perhaps too late, given their nearing bankruptcy) to see whether these features will sway customers from Netflix.

    Hope that helps. Check out our other coverage of Blockbuster and Netflix (linked above) when you have a chance.