Blockbuster is running a two-week promotion that allows Netflix subscribers to rent DVDs from its stores for free. Wedbush Morgan Securities analyst Michael Pachter says the move is designed to bring attention to Blockbuster’s own online rental service – which lets customers return movies to stores and immediately choose a new title.
“I think Blockbuster is on the defensive” – says Pachter. He estimates that as many as 2.5 million Netflix customers used to be loyal to Blockbuster. That’s a decent chunk out of Blockbuster’s 40% market share.
As for the future of the view-at-home movie business – Pachter doesn’t think downloadable movies are going to hurt either company. Movie studios make the bulk of their profit from DVD sales. Market saturation by downloadable movies is 10 years out – he says.
“Investors looking to invest in rentals today should feel pretty comfortable that these guys are going to pay off for the next three to five years” – Pachter says.