Blockbuster, Comcast Jointly Market Physical Video, VOD

Blockbuster is testing a joint marketing effort with cable system giant Comcast to promote its by-mail video rental service to Comcast subscribers, providing subscription access to DVD and Blu-ray Disc titles at a discount to its usual rates. The service, which is called "DVDsByMail from Comcast & Blockbuster," pushes subscription to Comcast and signups to Blockbuster's mail order rental service. Consumers can use a single Website to find titles available via Comcast's VOD and Blockbuster's mail-order video rental service

At present, the existing Blockbuster By Mail service is priced at $8.99 per month for one disc out at a time, $16.99 for two discs, and $19.99 for three discs. Comcast says its double- and triple-play customers will get $1 off Blockbuster's $8.99 mail order service and $3 off either of the other two. The two- and three-disc plans include in-store exchange privileges. The Blockbuster promotion also has smaller benefit for non-Comcast subscribers and subscribers to just one service.

Comcast told its subscribers, 'Customers will be able to pick from either DVDs or Blu-rays at no additional charge and they'll have the option of returning and exchanging the DVDs or Blu-rays through the mail or at their local participating Blockbuster store. Our integrated website will also tell you if your favorite titles are available at your local store.'

The Comcast/Blockbuster marketing trial was announced without fanfare August 9 via a corporate blog posting on Comcast's website by Eric Budin, VP of Business Development in Media & Entertainment. The following day, Blockbuster issued a prominent press release about its separate and unrelated video games by mail subscription service.

Comcast says that 70% of its total 23.2m subscribing households are within a 10-minute drive of a Blockbuster store, making the tie-up attractive. 'This agreement complements the thousands of movies and TV choices we already offer via On Demand and online, through XfinityTV online, premium channels like HBO, Cinemax, Starz and Showtime, Comcast's online store, and traditional pay-per-view,' Budin wrote on his blog.

In an Aug. 13 earnings announcement, Blockbuster acknowledged the venture, saying it is installing Comcast-dedicated kiosks in some of its stores to promote and facilitate signups for Comcast services. The earnings announcement quotes Blockbuster chairman and CEO Jim Keyes saying, 'This relationship gives us a cost-effective method for growing the reach and scale of our by-mail platform and leverages the power of our retail stores.'

Analysis
Blockbuster's ability to partner with a blue-chip media outfit like Comcast indicates to Blockbuster's creditors that the video store chain can still execute innovative programs even as it negotiates with those creditors to restructure its crushing $895m in long-term debt. Blockbuster is working hard to diversify, moving from its brick-and-mortar rental store stronghold into kiosk rental and a wide range of digital initiatives. The joint service with Comcast is in the beta testing stage, so it's not clear when or even if it will become a full-blown national program.

Blockbuster has a history of mounting joint marketing partnerships with potential rivals, which usually involve putting the Blockbuster logo on third-party services such as the Blockbuster Express self-service kiosks now being rolled out by NCR. Results of such cross-media ventures have been uneven. In 2000, Blockbuster marketed DirecTV in its stores and the satellite TV platform later used the Blockbuster name on a VOD service 'Blockbuster Ticket only on DirecTV,' though that alliance eventually faded.

The new Comcast-Blockbuster marketing venture is another test of the theory that consumers are in charge in the digital age - and that they have a vast appetite for movies and will consume across a range of media. The theory holds that it is better to ally with potential competitors when benefits can be obtained rather than erect walls to attempt to block out rivals at every turn.