NEW YORK — Blockbuster (BBI) gave a late holiday present to investors who feared that the No. 1 video rental chain would fall short of its forecast to end 2006 with at least 2 million online customers.
Its shares rose 6.6% to $5.64 after it said Wednesday that Blockbuster Online ended the year with 2 million paying subscribers. An additional 200,000 signed up for the two-week free trial. The unit is Blockbuster’s effort to challenge Netflix, the online video service that had 5.5 million subscribers at the end of the third quarter.
CEO John Anti-oco says his online unit hit fast-forward in November with the introduction of Blockbuster Total Access, a plan that lets customers return DVDs for new ones either via mail or instantly at Blockbuster stores.
That resulted in 500,000 sign-ups in the fourth quarter, matching the growth from all three previous quarters.
“We did a lot of consumer research on this concept before we launched it and had an expectation that was high,” he says. “But the results exceeded even our expectations.”
Several analysts also were startled by the results.
“I was skeptical. I didn’t think they could hit this target,” says Arvind Bhatia of Sterne Agee & Leach. “Two million is the number they said would get (the online business) to break even. But it sounds like Total Access is a success.”
Anti-oco is counting on spurring continued growth in the online business this quarter — the strongest period of the year for video rentals — with TV and Web ads promoting Total Access.
“There’s an awareness gap between us and Netflix, and we intend to close that gap,” he says.
Unknown is how many more consumers want to pay a monthly fee to pick out DVDs online and receive and return them primarily by mail.
kte12 on January 5th, 2007 at 12:28 pm