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The Old Kid on the Block

Where'd you watch your last movie? In the theater? On TV? It's increasingly likely that you watched it from your couch, after you pulled the DVD out of an envelope delivered by the U.S. Postal Service. And — to Blockbuster’s dismay — it's increasingly likely that the movie came from Netflix.

Since Netflix's 1999 debut, Blockbuster has been playing catch-up by developing its own online rental business. But even when it wins, it loses. So far in 2006, Blockbuster Online has grown from 1.2 to 1.5 million subscribers; in the same period, Netflix increased its base from 4.2 to 5.7 million. (Add it all up, and it’s a compelling reason why the number of moviegoers in 2005 was the lowest it has been in eight years, according to the MPAA.)

But now Blockbuster has unrolled a new online rental plan, "Total Access," creatively linked to its stores. (Which, incidentally, decreased from 9,000 to 8,500 over the past year.)

Previously, Blockbuster Online subscribers would order and receive movies from an online queue the same way Netflix users do. In addition, they received two printable coupons for free in-store rentals. Now, when a movie is shipped to a Blockbuster subscriber, he can trade the postage-paid envelope in to a retail store for an immediate rental, and the next movie from the online queue will automatically be shipped right away. Customers will still receive one free in-store coupon. Blockbuster hopes that this "never be without a movie" plan will help it reach two million subscribers by the end of the year.

It'll be interesting to see if this plan can rival Netflix. But Blockbuster does have one thing going for it, as Netflix founder and CEO Reed Hastings said in Fast Company. "[Customers] may not love them — it's like Kmart and Sears — but it's straightforward. The brand is a big advantage for them, because it's known."